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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



| |  |   |  |                                                                                         |  | 
| |  | - |  | --------------------------------------------------------------------------------------- |  | 
| |  | x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |  | 

For the quarterly period ended March 31, 2011

or



| |  |   |  |                                                                                          |  | 
| |  | - |  | ---------------------------------------------------------------------------------------- |  | 
| |  |  ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |  | 

For the transition period from        to

Commission File Number 333-166853





AQUILEX HOLDINGS LLC

(Exact name of registrant as specified in its charter)







| |  |  |  |  |                                                     |  |  |  |                                      |  |  | 
| |  |  |  |  | --------------------------------------------------- |  |  |  | ------------------------------------ |  |  | 
| |  |  |  |  | Delaware                                            |  |  |  | 02-0795750                           |  |  | 
| |  |  |  |  | (State of Incorporation)                            |  |  |  | (I.R.S. Employer Identification No.) |  |  | 
| |  |  | 
| |  |  |  |  | 3344 Peachtree Rd, N.E. Suite 2100,Atlanta, Georgia |  |  |  | 30326                                |  |  | 
| |  |  |  |  | (Address of Principal Executive Offices)            |  |  |  | (Zip Code)                           |  |  | 

Registrants telephone number, including area code:(404) 869-6677

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes
[X]    No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files).  Yes [  ]    No [  ] (registrant is not yet required to provide financial disclosure in an Interactive Data File format)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |      |  |  |  |                           |  |      |  | 
|----------------------- |  | ---- |  |  |  | ------------------------- |  | ---- |  | 
|Large accelerated filer |  | [  ] |  |  |  | Accelerated filer         |  | [  ] |  | 
|Non-accelerated filer   |  | [X]  |  |  |  | Smaller reporting company |  | [  ] |  | 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).  Yes [  ]    No [X]

The limited liability company ownership interests of the registrant
are not publicly traded. Therefore, there is no aggregate market value for the registrants outstanding equity that is readily determinable.



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##### Table of Contents

AQUILEX HOLDINGS LLC

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011

INDEX



|         |  |                                                                                       |  |  |      | 
|-------- |  | ------------------------------------------------------------------------------------- |  |  | ---- | 
|         |  | PART I  FINANCIAL INFORMATION                                                        |  |  |      | 
|         |  |                                                                                       |  |  | Page | 
|         |  |                                                                                      
|Item 1.  |  | Financial Statements (Unaudited)                                                      |  |  | 2    | 
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  |  | 21   | 
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                            |  |  | 30   | 
|Item 4.  |  | Controls and Procedures                                                               |  |  | 30   | 
|         |  |                                                                                      
|         |  | PART II  OTHER INFORMATION                                                           |  |  |      | 
|         |  |                                                                                      
|Item 1.  |  | Legal Proceedings                                                                     |  |  | 32   | 
|Item 1A. |  | Risk Factors                                                                          |  |  | 32   | 
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  |  | 32   | 
|Item 3.  |  | Defaults upon Senior Securities                                                       |  |  | 32   | 
|Item 4.  |  | Removed and Reserved                                                                  |  |  | 32   | 
|Item 5.  |  | Other Information                                                                     |  |  | 32   | 
|Item 6   |  | Exhibits                                                                              |  |  | 33   | 
|         |  | Signatures                                                                            |  |  | 34   | 





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##### Table of Contents

PART I  FINANCIAL INFORMATION

Item 1.  Financial Statements

Aquilex Holdings, LLC and Subsidiaries

Condensed Consolidated Balance Sheets(Unaudited)



Dollars in thousands



|                                                                         |  |               |              |  |                  |  |              | 
|------------------------------------------------------------------------ |  | ------------- | ------------ |  | ---------------- |  | ------------ | 
|                                                                         |  | March 31,2011 |              |  | December 31,2010 | 
|                                                                         |  |              
|Assets                                                                   |  |               |              |  |                  |  |              | 
|Current assets                                                           |  |               |              |  |                  |  |              | 
|Cash                                                                     |  |               | $      2,391 |  |                  |  | $      8,689 | 
|Accounts receivable, net of allowance of $1,461 and $1,552, respectively |  |               | 98,052       |  |                  |  | 80,430       | 
|Inventories                                                              |  |               | 13,499       |  |                  |  | 13,044       | 
|Cost in excess of billings                                               |  |               | 8,329        |  |                  |  | 4,165        | 
|Deferred tax asset                                                       |  |               | 2,378        |  |                  |  | 2,378        | 
|Income tax receivable                                                    |  |               | 2,785        |  |                  |  | 2,464        | 
|Prepaid expenses                                                         |  |               | 1,255        |  |                  |  | 1,908        | 
|Other current assets                                                     |  |               | 1,886        |  |                  |  | 1,946        | 
|                                                                         |  |               |              |  |                  |  |              | 
|Total current assets                                                     |  |               | 130,575      |  |                  |  | 115,024      | 
|                                                                         |  |              
|Property and equipment, net                                              |  |               | 73,356       |  |                  |  | 73,391       | 
|Goodwill                                                                 |  |               | 258,687      |  |                  |  | 258,687      | 
|Other intangible assets, net                                             |  |               | 203,032      |  |                  |  | 206,295      | 
|Deferred financing costs, net                                            |  |               | 13,735       |  |                  |  | 13,413       | 
|Other assets                                                             |  |               | 2,263        |  |                  |  | 2,226        | 
|                                                                         |  |               |              |  |                  |  |              | 
|Total assets                                                             |  |               | $  681,648   |  |                  |  | $  669,036   | 
|                                                                         |  |               |              |  |                  |  |              | 
|                                                                         |  |              
|Liabilities and Equity                                                   |  |               |              |  |                  |  |              | 
|Current liabilities                                                      |  |               |              |  |                  |  |              | 
|Accounts payable                                                         |  |               | $    18,893  |  |                  |  | $    17,622  | 
|Accrued liabilities                                                      |  |               | 43,268       |  |                  |  | 36,563       | 
|Income tax payable                                                       |  |               | 1,420        |  |                  |  | 1,192        | 
|Billings in excess of cost                                               |  |               | 3,219        |  |                  |  | 3,272        | 
|Interest payable                                                         |  |               | 7,309        |  |                  |  | 1,071        | 
|Current portion of long-term debt                                        |  |               | 1,850        |  |                  |  | 1,850        | 
|                                                                         |  |               |              |  |                  |  |              | 
|Total current liabilities                                                |  |               | 75,959       |  |                  |  | 61,570       | 
|                                                                         |  |              
|Long-term debt, net of discount and current portion                      |  |               | 384,331      |  |                  |  | 377,387      | 
|Income tax payable                                                       |  |               | 4,398        |  |                  |  | 4,398        | 
|Other notes payable                                                      |  |               | 512          |  |                  |  | -            | 
|Deferred income tax liabilities                                          |  |               | 36,312       |  |                  |  | 32,923       | 
|                                                                         |  |               |              |  |                  |  |              | 
|Total liabilities                                                        |  |               | 501,512      |  |                  |  | 476,278      | 
|                                                                         |  |               |              |  |                  |  |              | 
|Commitments and contingencies (Note 9)                                   |  |               |              |  |                  |  |              | 
|Equity                                                                   |  |               |              |  |                  |  |              | 
|Members capital                                                         |  |               | 399,915      |  |                  |  | 399,664      | 
|Accumulated deficit                                                      |  |               | (218,878)    |  |                  |  | (206,314)    | 
|Accumulated other comprehensive loss                                     |  |               | (447)        |  |                  |  | (592)        | 
|                                                                         |  |               |              |  |                  |  |              | 
|Total members equity                                                    |  |               | 180,590      |  |                  |  | 192,758      | 
|Noncontrolling interest                                                  |  |               | (454)        |  |                  |  | -            | 
|                                                                         |  |               |              |  |                  |  |              | 
|Total equity                                                             |  |               | 180,136      |  |                  |  | 192,758      | 
|                                                                         |  |               |              |  |                  |  |              | 
|Total liabilities and equity                                             |  |               | $  681,648   |  |                  |  | $  669,036   | 
|                                                                         |  |               |              |  |                  |  |              | 

The accompanying notes are an integral part of these condensed consolidated financial statements.



2



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Loss(Unaudited)



Dollars in thousands



|                                                                  |  |                             |          |  |      |   |          | 
|----------------------------------------------------------------- |  | --------------------------- | -------- |  | ---- | - | -------- | 
|                                                                  |  | Three monthsended March 31, |         
|                                                                  |  | 2011                        |          |  | 2010 |  
|                                                                  |  |                            
|Revenues                                                          |  | $                           | 109,501  |  |      | $ | 107,694  | 
|Cost of revenue, exclusive of depreciation shown below            |  |                             | 81,206   |  |      |   | 76,214   | 
|Depreciation                                                      |  |                             | 4,682    |  |      |   | 4,369    | 
|                                                                  |  |                             |          |  |      |   |          | 
|Gross profit                                                      |  |                             | 23,613   |  |      |   | 27,111   | 
|                                                                  |  |                            
|Operating expenses                                                |  |                             |          |  |      |   |          | 
|Selling, general and administrative expense                       |  |                             | 19,637   |  |      |   | 17,056   | 
|Depreciation and amortization                                     |  |                             | 3,857    |  |      |   | 5,023    | 
|                                                                  |  |                             |          |  |      |   |          | 
|Total operating expenses                                          |  |                             | 23,494   |  |      |   | 22,079   | 
|                                                                  |  |                            
|Other income (expense)                                            |  |                             |          |  |      |   |          | 
|Interest expense, net                                             |  |                             | (10,018) |  |      |   | (12,926) | 
|Other, net                                                        |  |                             | 222      |  |      |   | (418)    | 
|                                                                  |  |                             |          |  |      |   |          | 
|Total other expense, net                                          |  |                             | (9,796)  |  |      |   | (13,344) | 
|                                                                  |  |                             |          |  |      |   |          | 
|                                                                  |  |                            
|Loss before income expense                                        |  |                             | (9,677)  |  |      |   | (8,312)  | 
|                                                                  |  |                            
|Income tax expense                                                |  |                             | 3,389    |  |      |   | 4,203    | 
|                                                                  |  |                             |          |  |      |   |          | 
|                                                                  |  |                            
|Net loss                                                          |  |                             | (13,066) |  |      |   | (12,515) | 
|Less: Net loss attributable to noncontrolling interest            |  |                             | (502)    |  |      |   | -        | 
|                                                                  |  |                             |          |  |      |   |          | 
|Net loss attributable to Aquilex Holdings                         |  | $                           | (12,564) |  |      | $ | (12,515) | 
|                                                                  |  |                             |          |  |      |   |          | 
|                                                                  |  |                            
|Other comprehensive loss:                                         |  |                             |          |  |      |   |          | 
|                                                                  |  |                            
|Net loss                                                          |  | $                           | (13,066) |  |      | $ | (12,515) | 
|                                                                  |  |                            
|Foreign currency translation adjustment                           |  |                             | 140      |  |      |   | (77)     | 
|                                                                  |  |                             |          |  |      |   |          | 
|                                                                  |  |                            
|Other comprehensive loss                                          |  |                             | (12,926) |  |      |   | (12,592) | 
|                                                                  |  |                            
|Other comprehensive loss attributable to noncontrolling interest: |  |                             |          |  |      |   |          | 
|Net loss                                                          |  |                             | (502)    |  |      |   | -        | 
|Foreign currency translation adjustment                           |  |                             | (5)      |  |      |   | -        | 
|                                                                  |  |                             |          |  |      |   |          | 
|                                                                  |  |                            
|Other comprehensive loss attributable to noncontrolling interest  |  |                             | (507)    |  |      |   | -        | 
|                                                                  |  |                             |          |  |      |   |          | 
|                                                                  |  |                            
|Other comprehensive loss attributable to Aquilex Holdings         |  | $                           | (12,419) |  |      | $ | (12,592) | 
|                                                                  |  |                             |          |  |      |   |          | 

The accompanying notes are an integral part of these condensed consolidated financial statements.



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Aquilex Holdings, LLC and Subsidiaries

Condensed Consolidated Statements of Cash Flows(Unaudited)



Dollars in thousands



|                                                                                    |  |                             |          |  |      |   |          | 
|----------------------------------------------------------------------------------- |  | --------------------------- | -------- |  | ---- | - | -------- | 
|                                                                                    |  | Three monthsended March 31, |         
|                                                                                    |  | 2011                        |          |  | 2010 |  
|                                                                                    |  |                            
|Cash flows from operating activities                                                |  |                             |          |  |      |   |          | 
|Net loss                                                                            |  | $                           | (13,066) |  |      | $ | (12,515) | 
|Adjustments to reconcile net loss to net cash used in operating activities          |  |                             |          |  |      |   |          | 
|Depreciation                                                                        |  |                             | 5,276    |  |      |   | 5,059    | 
|Amortization of intangible assets                                                   |  |                             | 3,263    |  |      |   | 4,333    | 
|Bad debt expense                                                                    |  |                             | (86)     |  |      |   | 357      | 
|Deferred income taxes                                                               |  |                             | 3,379    |  |      |   | 4,191    | 
|(Gain) loss on sale of fixed assets                                                 |  |                             | (9)      |  |      |   | (112)    | 
|Amortization of deferred financing costs and original issue discount                |  |                             | 1,148    |  |      |   | 2,442    | 
|Noncash equity compensation                                                         |  |                             | 265      |  |      |   | 380      | 
|Change in fair value of interest rate caps                                          |  |                             | -        |  |      |   | 36       | 
|Changes in operating assets and liabilities                                         |  |                             |          |  |      |   |          | 
|Accounts receivable                                                                 |  |                             | (17,250) |  |      |   | (16,332) | 
|Inventories                                                                         |  |                             | (294)    |  |      |   | (390)    | 
|Cost in excess of billings                                                          |  |                             | (4,156)  |  |      |   | (4,469)  | 
|Prepaid expenses                                                                    |  |                             | 663      |  |      |   | 370      | 
|Other assets                                                                        |  |                             | 63       |  |      |   | (684)    | 
|Income taxes                                                                        |  |                             | (94)     |  |      |   | (236)    | 
|Accounts payable and accrued liabilities                                            |  |                             | 7,838    |  |      |   | 10,569   | 
|Billings in excess of cost                                                          |  |                             | (61)     |  |      |   | 552      | 
|Interest payable                                                                    |  |                             | 6,238    |  |      |   | 6,258    | 
|                                                                                    |  |                             |          |  |      |   |          | 
|Net cash used in operating activities                                               |  |                             | (6,883)  |  |      |   | (191)    | 
|                                                                                    |  |                             |          |  |      |   |          | 
|                                                                                    |  |                            
|Cash flows from investing activities                                                |  |                             |          |  |      |   |          | 
|Capital expenditures                                                                |  |                             | (5,301)  |  |      |   | (2,896)  | 
|Initial investment contribution to Aquilex Arabia joint venture                     |  |                             | 53       |  |      |   | -        | 
|Joint venture partner payment of expenses on behalf of Aquilex Arabia joint venture |  |                             | 512      |  |      |   | -        | 
|Proceeds from sales of property and equipment                                       |  |                             | 12       |  |      |   | 205      | 
|Restricted cash                                                                     |  |                             | -        |  |      |   | (454)    | 
|                                                                                    |  |                             |          |  |      |   |          | 
|Net cash used in investing activities                                               |  |                             | (4,724)  |  |      |   | (3,145)  | 
|                                                                                    |  |                             |          |  |      |   |          | 
|                                                                                    |  |                            
|Cash flows from financing activities                                                |  |                             |          |  |      |   |          | 
|Payments on long-term debt                                                          |  |                             | (463)    |  |      |   | (1,649)  | 
|Proceeds from revolver debt                                                         |  |                             | 7,000    |  |      |   | -        | 
|Payments on capital lease obligations                                               |  |                             | -        |  |      |   | (47)     | 
|Payment of deferred financing costs                                                 |  |                             | (1,063)  |  |      |   | (170)    | 
|                                                                                    |  |                             |          |  |      |   |          | 
|Net cash provided by (used in) financing activities                                 |  |                             | 5,474    |  |      |   | (1,866)  | 
|                                                                                    |  |                             |          |  |      |   |          | 
|Net decrease in cash and cash equivalents                                           |  |                             | (6,133)  |  |      |   | (5,202)  | 
|                                                                                    |  |                            
|Effect of foreign currency changes on cash                                          |  |                             | (165)    |  |      |   | 360      | 
|                                                                                    |  |                            
|Cash and cash equivalents                                                           |  |                             |          |  |      |   |          | 
|Beginning of period                                                                 |  |                             | 8,689    |  |      |   | 11,252   | 
|                                                                                    |  |                             |          |  |      |   |          | 
|End of period                                                                       |  | $                           | 2,391    |  |      | $ | 6,410    | 
|                                                                                    |  |                             |          |  |      |   |          | 
|                                                                                    |  |                            
|Supplemental cash flow information                                                  |  |                             |          |  |      |   |          | 
|Cash paid (received) during the period for:                                         |  |                             |          |  |      |   |          | 
|Interest                                                                            |  |                             | 2,537    |  |      |   | 4,237    | 
|Income taxes, net                                                                   |  |                             | (1,311)  |  |      |   | 412      | 

The accompanying notes are an integral
part of these condensed consolidated financial statements.



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Condensed Consolidated Statement of Changes in Equity(Unaudited)



Dollars in thousands, except per unit amounts



|                                                   |  |                             |             |  |        |   |         |                    |  |   |                                     |  |  |                     |       |  |                        |   |          |             |  |   |       |   |  |   |          | 
|-------------------------------------------------- |  | --------------------------- | ----------- |  | ------ | - | ------- | ------------------ |  | - | ----------------------------------- |  |  | ------------------- | ----- |  | ---------------------- | - | -------- | ----------- |  | - | ----- | - |  | - | -------- | 
|                                                   |  | CommonCapital InterestUnits |             |  | Amount |   |         | AccumulatedDeficit |  |   | AccumulatedOtherComprehensiveIncome |  |  | TotalMembersEquity |       |  | NoncontrollingInterest |   |          | TotalEquity | 
|Balances at December 31, 2010                      |  |                             | 397,114,500 |  |        | $ | 399,664 |                    |  | $ | (206,314)                           |  |  | $                   | (592) |  |                        | $ | 192,758  |             |  | $ | -     |   |  | $ | 192,758  | 
|                                                   |  |                             |             |  |        |   |        
|Capital Contributions                              |  |                             | -           |  |        |   | -       |                    |  |   | -                                   |  |  |                     | -     |  |                        |   | -        |             |  |   | 53    |   |  |   | 53       | 
|                                                   |  |                             |             |  |        |   |        
|Performance units compensation                     |  |                             | -           |  |        |   | 251     |                    |  |   | -                                   |  |  |                     | -     |  |                        |   | 251      |             |  |   | -     |   |  |   | 251      | 
|                                                   |  |                             |             |  |        |   |        
|Other comprehensive loss:                          |  |                             |             |  |        |   |         |                    |  |   |                                     |  |  |                     |       |  |                        |   |          |             |  |   |       |   |  |   |          | 
|Foreign currency translation adjustment            |  |                             | -           |  |        |   | -       |                    |  |   | -                                   |  |  |                     | 145   |  |                        |   | 145      |             |  |   | (5    | ) |  |   | 140      | 
|                                                   |  |                             |             |  |        |   |        
|Net loss for the three months ended March 31, 2011 |  |                             | -           |  |        |   | -       |                    |  |   | (12,564)                            |  |  |                     | -     |  |                        |   | (12,564) |             |  |   | (502) |   |  |   | (13,066) | 
|                                                   |  |                             |             |  |        |   |         |                    |  |   |                                     |  |  |                     |       |  |                        |   |          |             |  |   |       |   |  |   |          | 
|Balances at March 31, 2011                         |  |                             | 397,114,500 |  |        | $ | 399,915 |                    |  | $ | (218,878)                           |  |  | $                   | (447) |  |                        | $ | 180,590  |             |  | $ | (454) |   |  | $ | 180,136  | 
|                                                   |  |                             |             |  |        |   |         |                    |  |   |                                     |  |  |                     |       |  |                        |   |          |             |  |   |       |   |  |   |          | 

The accompanying notes are an integral part of these condensed consolidated financial statements.



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands





|1. | Description of Business and Basis of Presentation
|-- | -------------------------------------------------

Description of Business

Aquilex Holdings LLC and subsidiaries (Company) is a leading global
provider of a broad array of recurring critical industrial services to the oil and gas refining, chemical and petrochemical production, fossil and nuclear power generation and waste-to-energy industries. The Company provides these services through
the combination of proprietary automation technology, a specialized equipment fleet and a specially trained labor force. The Companys services are essential in maintaining and enhancing the efficiency, operability and profitability of customer
plants by minimizing downtime and extending service life at a lower cost than replacement alternatives.

The Company reports operating
results in two reportable segments: Specialty Repair and Overhaul (SRO) and Industrial Cleaning (IC).

SPECIALTY REPAIR AND OVERHAUL
(SRO)

SRO provides specialized welding overlay and repair services for industrial applications of erosion and corrosion protection
services, repair technology services, and shop services.

INDUSTRIAL CLEANING (IC)

IC provides industrial cleaning services to a wide range of processing industries, including petrochemical, oil refining, electric utilities and
pulp and paper.

ORGANIZATION

The Company is a Limited Liability Company, which is 100% owned by Aquilex Acquisition Sub III, LLC. As a 100% owned LLC, the Company is disregarded as an entity from its owner for federal and most state income tax
purposes.

Aquilex Acquisition Sub III, LLC has elected to be taxed as a C-corporation for income tax purposes. As such, income taxes
have been provided for the Company in accordance with Staff Accounting Bulletin (SAB) Topic 1Bs carve out accounting. In addition, income taxes have been provided for certain corporate subsidiaries of the company under the separate
return method for allocating consolidated income tax expense.



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands





Basis of Presentation

The accompanying unaudited condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC) and include our accounts and the accounts of our wholly owned subsidiaries. Certain information and note disclosures, normally
included in financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP), have been condensed or omitted pursuant to such rules and regulations. In managements opinion, the
unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of our financial position as of March 31, 2011 and our operating results, and cash
flows for the interim periods presented. The balance sheet at December 31, 2010 has been derived from our audited financial statements as of that date but does not include all disclosures required by U.S. GAAP. These financial statements and
the related notes should be read in conjunction with the December 31, 2010 consolidated financial statements and notes thereto, which were filed with the SEC on March 31, 2011 as part of the Companys Annual Report on Form 10-K. Our
results of operations for the three months ended March 31, 2011 are not necessarily indicative of the results of operations for a full year.



|2. | Significant Accounting Policies
|-- | -------------------------------

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company, its 100% owned subsidiaries, and a joint venture consolidated
in accordance with Accounting Standards Codification (ASC) 810Consolidation (ASC 810) (see Note 5). All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material. On an ongoing basis, estimates are reviewed based on
information that is currently available.

Fair Value of Financial Instruments

Fair value is defined under ASC 820, Fair Value Measurements and Disclosures, as the price that would be received to sell an asset or paid
to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a three-level hierarchy, which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring fair value. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined
as follows:

Level 1inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an
active market.

Level 2inputs to the valuation methodology include quoted prices for a similar asset or liability in an active
market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.

Level 3inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.

For the three months ended March 31, 2011, there have been no transfers between hierarchy levels.



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands





As of March 31, 2011, the Company had carrying values of $98,052 for accounts receivable, net, and $18,893 for accounts payable. For these respective items, the carrying value approximated fair value at
March 31, 2011. The carrying value for long-term debt was $386,181 and the fair value approximated $400,300 at March 31, 2011.

Noncontrolling Interest

Noncontrolling interests in the Companys condensed consolidated balance sheets represents the proportionate share of equity attributable to
the minority shareholder of the Aquilex Arabia joint venture. Noncontrolling interest is adjusted each period to reflect the allocation of comprehensive income to or the absorption of comprehensive losses by the noncontrolling interest. The Company
began consolidation of this joint venture upon receiving approval and certification by the Saudi government in February 2011. Accordingly, no prior year comparative period is presented.

Revenue Recognition

The
Company evaluates the circumstances of each contract to determine the appropriate application of revenue recognition methods.

SRO
Segment

The SRO construction services contracts that are short term in nature are primarily accounted for by the completed contract
method and these contracts set forth the scope of services and provide a detailed work plan and timetable. Additionally, these contracts generally include automatic pricing adjustments to account for changes in the price of weld wire, the primary
input material the Company uses in carrying out projects. In such cases, revenue is recognized at the completion of the job, when accepted by the customer, title and risk of loss have transferred to the customer and collectibility is reasonably
assured.

Certain other SRO contracts are accounted for by the percentage of completion method. This method is used where there are
reliable estimates of revenue and cost, the contract specifies terms and conditions, and both the purchaser and the Company have the ability and expectation to perform all the contractual duties. In this regard, the SRO segment uses two methods for
determining the percent complete.

The output method involves the use of contract milestones which are specifically outlined in the
contracts and reflect a reasonable estimate of progress on the project. Once the specific milestone is met, a percentage of revenue is recognized based on the cost incurred of the milestone and the estimated margin of the project. These milestones
have clearly defined, recognized, and separable value and cost that reasonably reflect the progress of a long-cycle contract across multiple accounting periods. In some contracts, both specific billing and completion milestones are present.
Sometimes, these are the same. However, the Company does have contracts where the billing milestone is set to have cash in advance of the revenue. In such circumstance, billing in excess of cost is recognized as a liability. In the event the project
does not have definitive milestones, the input method of cost-to-total estimated costs is used to measure results directly and to measure progress toward completion. In these arrangements, a percentage of revenue is recognized based on the ratio of
costs incurred to total estimated costs after giving effect to estimates of costs to complete based on most recent information. We recognize revisions in profit estimates to income in the period in which the revision is determined. Estimated
contract losses are recognized in full when determined.

The input method is used to determine the percent complete on time and
materials contracts. Under the time and materials contracts, revenue is recognized based upon hours and cost to date at the estimated margin of the job. Due to the nature of these jobs, actual invoicing is completed after the revenue event occurs
and therefore a cost in excess of billing is recorded at month end.

At March 31, 2011 and December 31, 2010, the SRO segment
did not have any contracts for which a loss was anticipated.

These methods for determining the percent complete are applied
consistently among all of the SRO segment contracts having similar characteristics.



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Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands





IC Segment

The industrial cleaning segment derives its revenues from services under time and
materials and fixed-price contracts. Revenues from time and materials contracts are recognized as services are performed and efforts are expended. Alternatively, revenues from fixed price contracts are recognized over the contractual period in a
ratable manner due to the consistent performance of services from period to period. Any losses on these contracts are recognized in the period during which they are estimable. At March 31, 2011 and December 31, 2010, the IC segment did not
have any contracts for which a loss was anticipated.

Income Taxes

The Company is a Limited Liability Company (LLC) and as such, members of an LLC are not personally liable for any debt, liability or obligation of
the Company. However, the Companys operations consist of both an LLC, which is not taxed as a separate entity, and certain corporate subsidiaries, which are subject to taxation under the provisions of the Internal Revenue Code.

The Company follows the asset and liability method of accounting for income taxes in accordance with ASC 740,Income Taxes. Under this
method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it
is more likely than not that such asset will be realized.

The Company regularly evaluates valuation allowances established for deferred
tax assets for which future realization is uncertain. The estimation of required valuation allowances includes an estimate of future taxable income, reversals of deferred tax liabilities, carry back periods, and tax planning strategies.

In accordance with ASC 740, the Company recorded reserves and interest for the uncertain outcome of certain tax positions and elected to include
any future penalties and interest related to uncertain tax positions in income tax expense.

The Company has determined that it has no
material increases or decreases in the liability for unrecognized tax benefits for the three months ended March 31, 2011.

New
Accounting Pronouncements

Accounting Standards Update (ASU) 2009-13, Revenue Recognition (Topic 605)

In October 2009, the Financial Accounting Standards Board (FASB) issued amendments to existing standards for revenue arrangements with multiple
components. The amendments generally require the allocation of consideration to separate components based on the relative selling price of each component in a revenue arrangement. The amendments are effective prospectively for revenue arrangements
entered into or materially modified after January 1, 2011. The adoption of this guidance did not have any effect on the Companys financial position and results of operations.



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands







|3. | Property and equipment
|-- | ----------------------

Property and
equipment consist of the following:



|                                  |  |               |          |  |                  |   |          |  |  | 
|--------------------------------- |  | ------------- | -------- |  | ---------------- | - | -------- |  |  | 
|                                  |  | March 31,2011 |          |  | December 31,2010 |   |          | 
|Land                              |  | $             | 1,569    |  |                  | $ | 1,569    |  | 
|Buildings                         |  |               | 1,780    |  |                  |   | 1,803    |  | 
|Improvements                      |  |               | 1,627    |  |                  |   | 1,613    |  | 
|Machinery and equipment           |  |               | 91,522   |  |                  |   | 91,009   |  | 
|Furniture, fixtures and equipment |  |               | 5,081    |  |                  |   | 5,065    |  | 
|Vehicles                          |  |               | 5,807    |  |                  |   | 5,786    |  | 
|Construction in progress          |  |               | 16,152   |  |                  |   | 11,467   |  | 
|                                  |  |               |          |  |                  |   |          |  | 
|                                  |  |               | 123,538  |  |                  |   | 118,312  |  | 
|Less: Accumulated depreciation    |  |               | (50,182) |  |                  |   | (44,921) |  | 
|                                  |  |               |          |  |                  |   |          |  | 
|Net property and equipment        |  | $             | 73,356   |  |                  | $ | 73,391   |  | 
|                                  |  |               |          |  |                  |   |          |  | 

Depreciation expense for the three months ended March 31, 2011 and 2010 was $5,276 and
$5,059, respectively.



|4. | Goodwill and Other Intangible Assets
|-- | ------------------------------------

At
both March 31, 2011 and December 31, 2010, the SRO and IC segments had Goodwill of $139,956 and $118,731, respectively. Other intangible assets consist of the following:



March 31, 2011


December 31, 2010GrossCarryingAmount


AccumulatedAmortization


NetCarryingAmount


GrossCarryingAmount


AccumulatedAmortization


NetCarryingAmountAmortizable intangible assetsCustomer relationshipsSRO

$
108,200


$
(2,761)


$
105,439


$
108,200


$
(690)


$
107,510IC


45,000



(6,875)



38,125



45,000



(6,125)



38,875TechnologySRO


7,400



(1,699)



5,701



7,400



(1,514)



5,886IC


16,500



(3,119)



13,381



16,500



(2,862)



13,638Non-compete agreementsSRO


150



(150)



-



150



(150)



-177,250



(14,604)



162,646



177,250



(11,341)



165,909Nonamortized intangible assetsTrade nameSRO


20,200



-



20,200



20,200



-



20,200IC


20,186



-



20,186



20,186



-



20,186Total other intangible assets

$
217,636


$
(14,604)


$
203,032


$
217,636


$
(11,341)


$
206,295


Management considers the trade names to have indefinite useful lives and, accordingly, are not subject to
amortization. The Company reached this conclusion principally due to the longevity of the Aquilex name and the associated subsidiary names, and because the Company considered renewal upon the legal limit of the trade name as perfunctory. The Company
expects to maintain usage of the Aquilex and the associated subsidiary trade names on existing products and introduce new products in the future that will also display the trade name. Consequently, trade names qualify as an indefinite-lived asset in
accordance with ASC 350, Intangibles  Goodwill and Other.

Intangible assets are amortized over the period the economic use
is consumed.



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands





Amortization expense for the three months ended March 31, 2011 and 2010 was $3,263 and $4,333, respectively.



|5. | Aquilex Arabia Joint Venture
|-- | ----------------------------

In the second
quarter of 2010, the Company entered into a joint venture agreement with a Saudi Arabian company to form a limited liability company for the purpose of marketing and providing the Companys services for refining, petrochemical and power
generation applications in the Middle East. The joint venture, Aquilex Arabia Co. Ltd. (the joint venture), received approval and certification by the Saudi government in February 2011. The Company is the majority shareholder with 60%
ownership in the joint venture. For operating purposes, the Company and the joint venture partner are obligated to provide ongoing funding on a percentage ownership basis.

The Company determined that the joint venture is a variable interest entity under ASC 810, Consolidation, and that the Company is the joint ventures primary beneficiary. The determination that the
Company is the primary beneficiary was based on ownership percentage, voting control and absorption of the profits and losses associated with the joint venture. Therefore, the financial position and results of operations of the joint venture are
consolidated. Earnings and losses of the joint venture are allocable on a ratable basis based on each partys ownership interest. The portion of the joint ventures earnings and losses owned by the joint venture partner is recorded in the
consolidated statements of operations as net income(loss) attributable to noncontrolling interests.

Through March 31, 2011, the
joint venture has incurred start up expenses of approximately $1,254 and had total assets at March 31, 2011 of $244.



|6. | Accrued Liabilities
|-- | -------------------

Accrued liabilities
consist of the following:



|                                       |  |               |        |  |                  |   |        |  |  | 
|-------------------------------------- |  | ------------- | ------ |  | ---------------- | - | ------ |  |  | 
|                                       |  | March 31,2011 |        |  | December 31,2010 |   |        | 
|Compensation and benefits              |  | $             | 14,756 |  |                  | $ | 8,831  |  | 
|Job costs                              |  |               | 15,151 |  |                  |   | 12,962 |  | 
|Insurance                              |  |               | 4,710  |  |                  |   | 4,643  |  | 
|State and foreign tax liabilities      |  |               | 2,029  |  |                  |   | 2,148  |  | 
|Warranty reserve                       |  |               | 289    |  |                  |   | 431    |  | 
|Contingent liability for tax attribute |  |               | 5,223  |  |                  |   | 5,223  |  | 
|Other accrued expenses                 |  |               | 1,110  |  |                  |   | 2,325  |  | 
|                                       |  |               |        |  |                  |   |        |  | 
|Total accrued liabilities              |  | $             | 43,268 |  |                  | $ | 36,563 |  | 
|                                       |  |               |        |  |                  |   |        |  | 



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands







|7. | Long-Term Debt
|-- | --------------

Long-term debt consists of
the following:



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |               |         |  |                  |   |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- |  | ---------------- | - | ------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | March 31,2011 |         |  | December 31,2010 |  
|Revolving $50,000 loan facility, interest payable quarterly for Prime-based borrowing or based on the LIBOR loan period for the LIBOR based borrowings; the Company has the option to pay
interest at either the base rate (rate is the greater of the federal funds rate plus 0.50%, the U.S. Prime rate, the one-month LIBOR plus 1.0%, or 2.5%) plus 3.5% or the Eurocurrency rate (rate is the greater of LIBOR or 1.5%) plus 4.5%. The
revolving loan facility matures on April 1, 2015 with the balance of the revolving loan facility due at maturity.                                                                                                                                                                                                                                                             |  | $             | 7,000   |  |                  | $ | -       | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              
|Senior term loan facility, interest payable quarterly for Prime-based borrowing or based on the LIBOR loan period for LIBOR-based borrowings; the Company has the option to pay interest at
either the base rate (rate is the greater of the federal funds rate plus 0.50%, the U.S. Prime rate, the one-month LIBOR plus 1.0%, or 2.5%) plus 3.5% or the Eurocurrency rate (rate is the greater of LIBOR or 1.5%) plus 4.5%. The term loan matures
on April 1, 2016, and amortizes in equal quarterly installments of annual amounts equal to 1% of the original principal amount during the first five and three-quarter years of the term loan, with the balance of the principal amount of the term
loan due at maturity. At March 31, 2011 and December 31, 2010, the interest rate was 6.0% and 5.5%, respectively. |  |               | 163,150 |  |                  |   | 163,613 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              
|Senior Notes - interest at a fixed rate of 11.125% per annum, unsecured, payable semi-annually in cash in arrears, on June 15 and December 15 of each year, commencing on
June 15, 2010. The notes mature on December 15, 2016.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |               | 225,000 |  |                  |   | 225,000 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |               |         |  |                  |   |         | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              
|Total debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |               | 395,150 |  |                  |   | 388,613 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              
|Less: current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |               | (1,850) |  |                  |   | (1,850) | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              
|Less: original issue discount (OID)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |               | (8,969) |  |                  |   | (9,376) | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |               |         |  |                  |   |         | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              
|Long-term debt, less current portion and OID                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | $             | 384,331 |  |                  | $ | 377,387 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |               |         |  |                  |   |         | 

At March 31, 2011 and December 31, 2010, the Company had $13,992 and $13,714 outstanding letter of credit
obligations, respectively. At March 31, 2011 and December 31, 2010, the available revolving capacity under the revolving loan facility was $29,008 and $36,286, respectively.

Covenants

On
February 28, 2011, the Company entered into Amendment No. 1 (Amendment) to its Amended and Restated Credit Agreement (Credit Agreement), dated as of April 1, 2010 and modified on June 17, 2010, with the Royal Bank of Canada, as
administrative agent and L/C (Letter of Credit) Issuer, and the required lenders thereunder.



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands





The Amendment, among other things, provided the following:



| | § |  | increased the Applicable Rate by 50 basis points,
| | - |  | -------------------------------------------------

| | § |  | increased the size of the basket for investments in Non-Loan Party Subsidiaries and Unrestricted Subsidiaries to the greater of $20,000,000 and 10% of Total
Tangible Assets,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | § |  | increased the size of the baskets for Non-Loan Party Subsidiaries to guarantee and incur indebtedness in the aggregate to 10% of Total Tangible Assets and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | § |  | granted additional head room for the Companys financial maintenance covenants (Total Leverage Ratio, Interest Coverage Ratio and Senior Secured Leverage
Ratio, each as defined in the Credit Agreement).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company paid a one-time amendment fee of 25 basis points, or
$1,063, to participating lenders, based on outstanding commitments and loans, and paid arranging fees for the amendment to Royal Bank of Canada and Morgan Stanley Senior Funding, Inc. In addition, the guarantors under the Credit Agreement executed
consents to the Amendment. Except as amended by the Amendment, the remaining terms of the Credit Agreement remain in full force and effect.

At March 31, 2011, the Companys Amended Credit Agreement contains certain financial maintenance covenants requiring us to maintain certain minimum or maximum financial ratios, as follows: (i) a
minimum interest coverage ratio ranging from 1.55:1 to 1.95:1 over the term of the Amended Credit Agreement; (ii) a maximum leverage ratio ranging from 6.75:1 to 4.85:1 over the term of the Amended Credit Agreement; and (ii) a maximum
secured leverage ratio ranging from 3.00:1 to 2.50:1 over the term of the Amended Credit Agreement.

Subject to various exceptions and
baskets set forth in the Amended Credit Agreement, the Company and its subsidiaries (other than any unrestricted subsidiaries) are restricted from taking certain actions, including: (i) incurring additional indebtedness; (ii) creating
liens on assets; (iii) making investments, loans or advances in or to other persons; (iv) paying dividends or distributions on, or repurchasing stock or other equity interests; (v) repaying, redeeming or repurchasing certain
indebtedness; (vi) changing the nature of the Companys business; (vii) engaging in transactions with affiliates; (viii) undergoing fundamental changes (including mergers); and (ix) making dispositions of assets. The Company
is also prohibited from making capital expenditures in excess of the greater of $25,000 and 25% of Adjusted EBITDA (as defined in the Amended Credit Agreement) in any fiscal year, provided that any unused amounts in one fiscal year may be carried
over to the next year. The Amended Credit Agreement also contains cross default covenants tied to all other indebtedness of the Company.

Subject to various exceptions and baskets contained in the Senior Notes indenture, the 11 1/8% Senior Notes terms include covenants that restrict
the Company and its subsidiaries from taking certain actions, including (i) incurring additional indebtedness; (ii) creating liens on assets; (iii) paying dividends or distributions on, or repurchasing stock or other equity interests;
(iv) repaying, redeeming or repurchasing certain indebtedness; (v) making investments, loans or advances in or to other persons; (vi) changing the nature of the Companys business; (vii) engaging in transactions with
affiliates; (viii) undergoing fundamental changes (including mergers); and (ix) making dispositions of the Companys assets. The Senior Notes indenture also contains cross default covenants tied to all other indebtedness of the
Company.

Covenant Compliance

As of March 31, 2011, the Company was in compliance with all of its financial covenants in its Amended Credit Agreement. Based on the Companys current business plan, the Company believes its existing
cash balances, cash generated from operations and borrowing availability under the Companys revolving credit facility will be sufficient for the Company to meet anticipated cash needs, including debt payment requirements, for the next twelve
months. The Company also believes that it will be in compliance with the debt covenants for the next twelve months. However, if the Company is unable to do so, it could have a material adverse impact on the Companys financial position, results
of operations, and cash flows. Execution of the Companys business plan and continued compliance with the Companys debt covenants are dependent upon the Company obtaining a minimum Adjusted



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands





EBITDA which is defined as EBITDA further adjusted to exclude certain non-cash or unusual items permitted in calculating covenant compliance in our Amended Credit Agreement. The Companys
expectations regarding Adjusted EBITDA depend on certain estimates and assumptions regarding the demand and rates for the Companys services and operating and general and administrative expenses which could prove to be inaccurate. It also
contains an estimate of the extent and timing of the release of deferred maintenance and repair projects by the Companys customers. A deviation from one or more of these estimates or assumptions could result in a violation of one or more of
the Companys covenants which could result in all or a portion of the Companys outstanding debt becoming immediately due and payable.

If the Company is unable to generate sufficient cash flow or is otherwise unable to obtain funds necessary to meet required payments of principal and interest on the Companys indebtedness, or if the Company
otherwise fails to comply with the various covenants in the agreements governing the Companys indebtedness, including the covenants contained in the Companys Amended Credit Agreement, the Company would be in default under the terms of
the agreements governing such indebtedness. Prior to such default, the Company could consider opportunities to reduce certain discretionary expenditures or prepay certain amounts of principal outstanding under the Amended Credit Agreement. In the
event of such a default under the Companys Amended Credit Agreement, including a failure to satisfy the specified financial ratios, the Company would need to seek (i) an equity contribution or (ii) a waiver of all covenant defaults
under the Amended Credit Agreement.



|8. | Deferred Financing Costs and Original Issue Discount
|-- | ----------------------------------------------------

In February 2011, the Company paid $1,063 of deferred financing costs as a result of the amendment and arranging fees upon entering into its Amended and Restated Credit Agreement.

Deferred financing costs are amortized over the life of the related debt using the effective interest method. At March 31, 2011 and
December 31, 2010, the Company had $13,735 and $13,413 of net outstanding deferred financing costs, respectively.

Original Issue
Discount (OID) is amortized to the carrying value of the debt on the balance sheet and charged to interest expense over the life of the related debt using the effective interest method. OID is the discount from par value at the time that a bond or
other debt instrument is issued. The discount represents the difference between the stated redemption price at maturity and the issue price of the debt instrument. At March 31, 2011 and December 31, 2010, the Company had $8,969 and $9,376
of unamortized OID costs, respectively.

The Company recorded amortization of deferred financing costs and OID to interest expense of
$1,130 and $2,442 for the three months ended March 31, 2011 and 2010, respectively.



|9. | Commitments and Contingencies
|-- | -----------------------------

Insurance

The Company has
a $500,000 per occurrence deductible insurance program for most losses related to general liability, product liability, automobile liability, workers compensation, and certain legal claims. For the Companys environmental liability, they
have a $250,000 per occurrence deductible. The expected ultimate cost for claims incurred as of the balance sheet date is not discounted and is recognized as a liability. Self-insurance losses for claims filed and claims incurred but not reported
are accrued based upon estimates of the aggregate liability for uninsured claims using loss development factors and actuarial assumptions followed in the insurance industry and historical loss development experience. The Company has a $300,000 per
covered person deductible insurance policy for medical and dental coverage. The Company has not incurred significant claims or losses on any of these insurance policies. As of March 31, 2011 and December 31, 2010, $4,710 and $4,643,
respectively, were included in accrued liabilities in the accompanying balance sheets for self-insurance claims.



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands





Litigation

The Company is a defendant in various lawsuits arising in the normal course of our
business. Substantially all of these suits are being defended by the Company, their insurance carriers or other parties pursuant to indemnification obligations. The Company believes a majority of the claims covered by insurance will be resolved at
or for less than the applicable deductibles and that any liability in excess of a deductible will not exceed the limits of the applicable insurance policies. Although the results of litigation cannot be predicted with certainty, the Company believes
adequate provision has been made for substantially all of the outstanding claims and the final outcome of any pending litigation will not have a material adverse effect on our consolidated financial position or results of operations.

Teck Cominco Metals Ltd. v. WSI, et al. The Company is named as a defendant in this suit filed in the Supreme Court of British Columbia,
Canada, in which the plaintiff alleges that a boiler explosion it experienced in 2004 was the result of a water leak caused by allegedly negligent fabrication work performed by defendant Foster Wheeler Pyropower, Inc., or allegedly negligent repair
work subsequently performed by WSI in 1998, 1999 or 2002. The plaintiff alternatively alleges that WSI negligently failed to alert it to the hazardous condition of the boiler. The plaintiff claims damages of approximately $28,000. WSIs insurer
has been notified about this litigation and is funding the defense costs. Discovery in this matter commenced in April 2008 and is ongoing. The Company obtained evidence that the leak in question may have been caused by a third party, and joined such
third party as well as other potentially responsible parties as defendants in this litigation. The Company intends to vigorously defend this matter and does not believe a loss is either probable or reasonably estimable.

Performance Bonds

During
the ordinary course of business, the Company is periodically required to enter into performance bond arrangements to collateralize its obligations under various contracts. The Company has a total of $7,755 and $5,532 in performance bond obligations
as of March 31, 2011 and December 31, 2010, respectively.



|10. | Income Taxes
|--- | ------------

Income tax provisions for the
interim period are based on estimated annual income tax rates, adjusted to reflect the effects of any significant, infrequent, or unusual items which are required to be discretely recognized within the current interim period. The Companys
effective tax rate was (35.0%) and (50.6%) for the three months ended March 31, 2011 and 2010, respectively. The change in our effective tax rate is primarily attributable to changes in projected pre-tax book loss, deduction
limitations for per diems for field employees, non-deductible stock based compensation, and other nondeductible expenses. As a result of these significant nondeductible expenses, the forecasted annual effective income tax rates for the three months
ended March 31, 2011 and 2010 are negative, thereby resulting in income tax expense on pre-tax book losses for such periods.



|11. | Employee Benefit Plans
|--- | ----------------------

The Company
maintains a 401(k) plan into which eligible employees may elect to contribute from 0% to 75% of their pre-tax compensation subject to an annual maximum dollar amount as set by the Internal Revenue Service. At its discretion, the Company may make
discretionary matching cash contributions. Employer 401(k) matching contributions to the plan were $455 and $0 for the three months ended March 31, 2011 and 2010, respectively.

Prior to April 2010, each segment maintained a separate 401(k) plan. Subsequently, all plans were converted to one consolidated Aquilex
401(k) plan.



|12. | Supplemental Guarantor Information
|--- | ----------------------------------

On December 23, 2009, the Company completed an offering of $225,000 unsecured 111/8% Senior Notes due 2016. The Senior Notes are jointly, severally, fully,
and unconditionally guaranteed on an unsecured senior basis by all of the current 100% owned material U.S. subsidiaries (Guarantor Subsidiaries). Aquilex Finance Corp. (Aquilex Finance), which is a
co-



15



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands





issuer of the notes, and the Companys non-U.S. subsidiaries and consolidated joint venture are not guarantors of the notes.

The following supplemental information presents the financial position, results of operations and cash flows of Aquilex Holdings LLC (Parent), the
Guarantor Subsidiaries, and the Non-Guarantor Subsidiaries as of March 31, 2011 and December 31, 2010 and for the three months ended March 31, 2011 and 2010.

The consolidating statement of operations for the three months ended March 31, 2010 has been revised to decrease Equity in net income of the Guarantor subsidiaries by $743. This increase is offset by a
corresponding revision of the same amount to the eliminations column.

Aquilex Finance is presented as a co-issuer and has only minimal
amounts.



|                                                    |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|--------------------------------------------------- |  | --------------- | --------- |  | ------------------------ | - | - | --------------------- |  | - | ------------------------- |  |  | ------------ | ------ |  | ------------ | - | --------- | - |  | - | --------- | 
|                                                    |  | March 31, 2011  |          
|                                                    |  | Co-issuerParent |           |  | Co-issuerAquilex Finance |   |   | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |  |  | Eliminations |        |  | Consolidated |  
|Assets                                              |  |                 |           | 
|Current assets                                      |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|Cash                                                |  | $               | 3,635     |  |                          | $ | - |                       |  | $ | (1,983)                   |  |  | $            | 739    |  |              | $ | -         |   |  | $ | 2,391     | 
|Accounts receivable, net                            |  |                 | -         |  |                          |   | - |                       |  |   | 92,884                    |  |  |              | 5,168  |  |              |   | -         |   |  |   | 98,052    | 
|Inventories, net                                    |  |                 | -         |  |                          |   | - |                       |  |   | 10,724                    |  |  |              | 2,775  |  |              |   | -         |   |  |   | 13,499    | 
|Cost in excess of billings                          |  |                 | -         |  |                          |   | - |                       |  |   | 8,197                     |  |  |              | 132    |  |              |   | -         |   |  |   | 8,329     | 
|Deferred tax asset                                  |  |                 | 86        |  |                          |   | - |                       |  |   | 2,277                     |  |  |              | 15     |  |              |   | -         |   |  |   | 2,378     | 
|Income tax receivable                               |  |                 | -         |  |                          |   | - |                       |  |   | 2,646                     |  |  |              | 139    |  |              |   | -         |   |  |   | 2,785     | 
|Prepaid expenses                                    |  |                 | 451       |  |                          |   | - |                       |  |   | 647                       |  |  |              | 157    |  |              |   | -         |   |  |   | 1,255     | 
|Other current assets                                |  |                 | 846       |  |                          |   | - |                       |  |   | 1,027                     |  |  |              | 13     |  |              |   | -         |   |  |   | 1,886     | 
|                                                    |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|Total current assets                                |  |                 | 5,018     |  |                          |   | - |                       |  |   | 116,419                   |  |  |              | 9,138  |  |              |   | -         |   |  |   | 130,575   | 
|Property and equipment, net                         |  |                 | 712       |  |                          |   | - |                       |  |   | 71,799                    |  |  |              | 845    |  |              |   | -         |   |  |   | 73,356    | 
|Goodwill                                            |  |                 | -         |  |                          |   | - |                       |  |   | 258,687                   |  |  |              | -      |  |              |   | -         |   |  |   | 258,687   | 
|Other intangible assets, net                        |  |                 | -         |  |                          |   | - |                       |  |   | 203,032                   |  |  |              | -      |  |              |   | -         |   |  |   | 203,032   | 
|Deferred financing costs, net                       |  |                 | -         |  |                          |   | - |                       |  |   | 13,735                    |  |  |              | -      |  |              |   | -         |   |  |   | 13,735    | 
|Other assets                                        |  |                 | 1,670     |  |                          |   | - |                       |  |   | 636                       |  |  |              | 627    |  |              |   | (670)     |   |  |   | 2,263     | 
|Investment in affiliates                            |  |                 | 150,991   |  |                          |   | - |                       |  |   | 2,499                     |  |  |              | -      |  |              |   | (153,490) |   |  |   | -         | 
|                                                    |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|Total assets                                        |  | $               | 158,391   |  |                          | $ | - |                       |  | $ | 666,807                   |  |  | $            | 10,610 |  |              | $ | (154,160) |   |  | $ | 681,648   | 
|                                                    |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|Liabilities and Equity                              |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|Current liabilities                                 |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|Accounts payable                                    |  | $               | 150       |  |                          | $ | - |                       |  | $ | 16,255                    |  |  | $            | 2,488  |  |              | $ | -         |   |  | $ | 18,893    | 
|Accrued liabilities                                 |  |                 | 3,494     |  |                          |   | - |                       |  |   | 38,660                    |  |  |              | 1,114  |  |              |   | -         |   |  |   | 43,268    | 
|Income tax payable                                  |  |                 | -         |  |                          |   | - |                       |  |   | 1,420                     |  |  |              | -      |  |              |   | -         |   |  |   | 1,420     | 
|Billings in excess of cost                          |  |                 | -         |  |                          |   | - |                       |  |   | 3,033                     |  |  |              | 186    |  |              |   | -         |   |  |   | 3,219     | 
|Interest payable                                    |  |                 | 7,309     |  |                          |   | - |                       |  |   | -                         |  |  |              | -      |  |              |   | -         |   |  |   | 7,309     | 
|Current portion of long-term debt                   |  |                 | 1,850     |  |                          |   | - |                       |  |   | -                         |  |  |              | -      |  |              |   | -         |   |  |   | 1,850     | 
|Intercompany                                        |  |                 | (29,467)  |  |                          |   | - |                       |  |   | 25,533                    |  |  |              | 3,739  |  |              |   | 195       |   |  |   | -         | 
|                                                    |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|Total current liabilities                           |  |                 | (16,664)  |  |                          |   | - |                       |  |   | 84,901                    |  |  |              | 7,527  |  |              |   | 195       |   |  |   | 75,959    | 
|Long-term debt, net of discount and current portion |  |                 | 384,331   |  |                          |   | - |                       |  |   | -                         |  |  |              | -      |  |              |   | -         |   |  |   | 384,331   | 
|Other notes payable                                 |  |                 | -         |  |                          |   | - |                       |  |   | -                         |  |  |              | 1,377  |  |              |   | (865)     |   |  |   | 512       | 
|Intercompany debt                                   |  |                 | (380,427) |  |                          |   | - |                       |  |   | 380,427                   |  |  |              | -      |  |              |   | -         |   |  |   | -         | 
|Income tax payable                                  |  |                 | -         |  |                          |   | - |                       |  |   | 4,398                     |  |  |              | -      |  |              |   | -         |   |  |   | 4,398     | 
|Deferred income tax liabilities                     |  |                 | (8,985)   |  |                          |   | - |                       |  |   | 44,957                    |  |  |              | 340    |  |              |   | -         |   |  |   | 36,312    | 
|                                                    |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|Total liabilities                                   |  |                 | (21,745)  |  |                          |   | - |                       |  |   | 514,683                   |  |  |              | 9,244  |  |              |   | (670)     |   |  |   | 501,512   | 
|Equity                                              |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|Members capital                                    |  |                 | 399,915   |  |                          |   | - |                       |  |   | 369,023                   |  |  |              | -      |  |              |   | (369,023) |   |  |   | 399,915   | 
|Accumulated deficit                                 |  |                 | (219,380) |  |                          |   | - |                       |  |   | (216,459)                 |  |  |              | 1,764  |  |              |   | 214,695   |   |  |   | (219,380) | 
|Accumulated other comprehensive income (loss)       |  |                 | (452)     |  |                          |   | - |                       |  |   | (440)                     |  |  |              | (531)  |  |              |   | 971       |   |  |   | (452)     | 
|                                                    |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|Total members equity                               |  |                 | 180,083   |  |                          |   | - |                       |  |   | 152,124                   |  |  |              | 1,233  |  |              |   | (153,357  | ) |  |   | 180,083   | 
|Noncontrolling interest                             |  |                 | 53        |  |                          |   | - |                       |  |   | -                         |  |  |              | 133    |  |              |   | (133)     |   |  |   | 53        | 
|                                                    |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|Total equity                                        |  |                 | 180,136   |  |                          |   | - |                       |  |   | 152,124                   |  |  |              | 1,366  |  |              |   | (153,490) |   |  |   | 180,136   | 
|                                                    |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 
|Total liabilities and equity                        |  | $               | 158,391   |  |                          | $ | - |                       |  | $ | 666,807                   |  |  | $            | 10,610 |  |              | $ | (154,160) |   |  | $ | 681,648   | 
|                                                    |  |                 |           |  |                          |   |   |                       |  |   |                           |  |  |              |        |  |              |   |           |   |  |   |           | 



16



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands







|                                                    |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 
|--------------------------------------------------- |  | ----------------- | ------------ |  | ------------------------ |  | ---------- | --------------------- |  |  | ------------------------- |  |  | ------------ | ------------ |  | ------------ |  | -------------- |  |  |  | ------------ | 
|                                                    |  | December 31, 2010 |             
|                                                    |  | Co-issuerParent   |              |  | Co-issuerAquilex Finance |  |            | GuarantorSubsidiaries |  |  | Non-GuarantorSubsidiaries |  |  | Eliminations |              |  | Consolidated | 
|Assets                                              |  |                   |              | 
|Current assets                                      |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 
|Cash                                                |  |                   | $    12,383  |  |                          |  | $        - |                       |  |  | $    (6,035)              |  |  |              | $      2,341 |  |              |  | $            - |  |  |  | $      8,689 | 
|Accounts receivable, net                            |  |                   | -            |  |                          |  | -          |                       |  |  | 76,379                    |  |  |              | 4,051        |  |              |  | -              |  |  |  | 80,430       | 
|Inventories, net                                    |  |                   | 111          |  |                          |  | -          |                       |  |  | 10,451                    |  |  |              | 2,482        |  |              |  | -              |  |  |  | 13,044       | 
|Cost in excess of billings                          |  |                   | -            |  |                          |  | -          |                       |  |  | 4,116                     |  |  |              | 49           |  |              |  | -              |  |  |  | 4,165        | 
|Deferred tax asset                                  |  |                   | 86           |  |                          |  | -          |                       |  |  | 2,277                     |  |  |              | 15           |  |              |  | -              |  |  |  | 2,378        | 
|Income tax receivable                               |  |                   | -            |  |                          |  | -          |                       |  |  | 2,464                     |  |  |              | -            |  |              |  | -              |  |  |  | 2,464        | 
|Prepaid expenses                                    |  |                   | 964          |  |                          |  | -          |                       |  |  | 796                       |  |  |              | 148          |  |              |  | -              |  |  |  | 1,908        | 
|Other current assets                                |  |                   | 740          |  |                          |  | -          |                       |  |  | 1,175                     |  |  |              | 31           |  |              |  | -              |  |  |  | 1,946        | 
|                                                    |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 
|Total current assets                                |  |                   | 14,284       |  |                          |  | -          |                       |  |  | 91,623                    |  |  |              | 9,117        |  |              |  | -              |  |  |  | 115,024      | 
|Property and equipment, net                         |  |                   | 795          |  |                          |  | -          |                       |  |  | 71,771                    |  |  |              | 825          |  |              |  | -              |  |  |  | 73,391       | 
|Goodwill                                            |  |                   | -            |  |                          |  | -          |                       |  |  | 258,687                   |  |  |              | -            |  |              |  | -              |  |  |  | 258,687      | 
|Other intangible assets, net                        |  |                   | -            |  |                          |  | -          |                       |  |  | 206,295                   |  |  |              | -            |  |              |  | -              |  |  |  | 206,295      | 
|Deferred financing costs, net                       |  |                   | -            |  |                          |  | -          |                       |  |  | 13,413                    |  |  |              | -            |  |              |  | -              |  |  |  | 13,413       | 
|Other assets                                        |  |                   | 1,000        |  |                          |  | -          |                       |  |  | 636                       |  |  |              | 590          |  |              |  | -              |  |  |  | 2,226        | 
|Investment in affiliates                            |  |                   | 164,023      |  |                          |  | -          |                       |  |  | 1,993                     |  |  |              | -            |  |              |  | (166,016)      |  |  |  | -            | 
|                                                    |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 
|Total assets                                        |  |                   | $  180,102   |  |                          |  | $        - |                       |  |  | $  644,418                |  |  |              | $    10,532  |  |              |  | $ (166,016)    |  |  |  | $  669,036   | 
|                                                    |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 
|Liabilities and Members Equity                     |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 
|Current liabilities                                 |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 
|Accounts payable                                    |  |                   | $        487 |  |                          |  | $        - |                       |  |  | $    14,920               |  |  |              | $      2,215 |  |              |  | $            - |  |  |  | $    17,622  | 
|Accrued liabilities                                 |  |                   | 4,195        |  |                          |  | -          |                       |  |  | 30,909                    |  |  |              | 1,459        |  |              |  | -              |  |  |  | 36,563       | 
|Income tax payable                                  |  |                   | -            |  |                          |  | -          |                       |  |  | 1,009                     |  |  |              | 183          |  |              |  | -              |  |  |  | 1,192        | 
|Billings in excess of cost                          |  |                   | -            |  |                          |  | -          |                       |  |  | 3,201                     |  |  |              | 71           |  |              |  | -              |  |  |  | 3,272        | 
|Interest payable                                    |  |                   | 1,071        |  |                          |  | -          |                       |  |  | -                         |  |  |              | -            |  |              |  | -              |  |  |  | 1,071        | 
|Current portion of long-term debt                   |  |                   | 1,850        |  |                          |  | -          |                       |  |  | -                         |  |  |              | -            |  |              |  | -              |  |  |  | 1,850        | 
|Intercompany                                        |  |                   | (9,194)      |  |                          |  | -          |                       |  |  | 4,600                     |  |  |              | 4,594        |  |              |  | -              |  |  |  | -            | 
|                                                    |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 
|Total current liabilities                           |  |                   | (1,591)      |  |                          |  | -          |                       |  |  | 54,639                    |  |  |              | 8,522        |  |              |  | -              |  |  |  | 61,570       | 
|Long-term debt, net of discount and current portion |  |                   | 377,387      |  |                          |  | -          |                       |  |  | -                         |  |  |              | -            |  |              |  | -              |  |  |  | 377,387      | 
|Intercompany debt                                   |  |                   | (379,827)    |  |                          |  | -          |                       |  |  | 379,827                   |  |  |              | -            |  |              |  | -              |  |  |  | -            | 
|Income tax payable                                  |  |                   | -            |  |                          |  | -          |                       |  |  | 4,398                     |  |  |              | -            |  |              |  | -              |  |  |  | 4,398        | 
|Deferred income tax liabilities                     |  |                   | (8,625)      |  |                          |  | -          |                       |  |  | 41,531                    |  |  |              | 17           |  |              |  | -              |  |  |  | 32,923       | 
|                                                    |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 
|Total liabilities                                   |  |                   | (12,656)     |  |                          |  | -          |                       |  |  | 480,395                   |  |  |              | 8,539        |  |              |  | -              |  |  |  | 476,278      | 
|Members equity                                     |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 
|Members capital                                    |  |                   | 399,664      |  |                          |  | -          |                       |  |  | 369,023                   |  |  |              | -            |  |              |  | (369,023)      |  |  |  | 399,664      | 
|Accumulated deficit                                 |  |                   | (206,314)    |  |                          |  | -          |                       |  |  | (204,408)                 |  |  |              | 2,664        |  |              |  | 201,744        |  |  |  | (206,314)    | 
|Accumulated other comprehensive income (loss)       |  |                   | (592)        |  |                          |  | -          |                       |  |  | (592)                     |  |  |              | (671)        |  |              |  | 1,263          |  |  |  | (592)        | 
|                                                    |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 
|Total members equity                               |  |                   | 192,758      |  |                          |  | -          |                       |  |  | 164,023                   |  |  |              | 1,993        |  |              |  | (166,016)      |  |  |  | 192,758      | 
|                                                    |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 
|Total liabilities and members equity               |  |                   | $  180,102   |  |                          |  | $        - |                       |  |  | $  644,418                |  |  |              | $    10,532  |  |              |  | $ (166,016)    |  |  |  | $  669,036   | 
|                                                    |  |                   |              |  |                          |  |            |                       |  |  |                           |  |  |              |              |  |              |  |                |  |  |  |              | 



|                                                       |  |                                           |               |  |                          |  |            |                       |  |  |                           |  |  |              |            |  |              |  |                |  |  |  |             | 
|------------------------------------------------------ |  | ----------------------------------------- | ------------- |  | ------------------------ |  | ---------- | --------------------- |  |  | ------------------------- |  |  | ------------ | ---------- |  | ------------ |  | -------------- |  |  |  | ----------- | 
|                                                       |  | For the three months ended March 31, 2011 |              
|                                                       |  | Co-issuerParent                           |               |  | Co-issuerAquilex Finance |  |            | GuarantorSubsidiaries |  |  | Non-GuarantorSubsidiaries |  |  | Eliminations |            |  | Consolidated | 
|Revenues                                               |  |                                           | $           - |  |                          |  | $        - |                       |  |  | $  102,890                |  |  |              | $  6,611   |  |              |  | $            - |  |  |  | $  109,501  | 
|Cost of revenue, exclusive of depreciation shown below |  |                                           | -             |  |                          |  | -          |                       |  |  | 76,239                    |  |  |              | 4,967      |  |              |  | -              |  |  |  | 81,206      | 
|Depreciation                                           |  |                                           | -             |  |                          |  | -          |                       |  |  | 4,682                     |  |  |              | -          |  |              |  | -              |  |  |  | 4,682       | 
|                                                       |  |                                           |               |  |                          |  |            |                       |  |  |                           |  |  |              |            |  |              |  |                |  |  |  |             | 
|Gross profit                                           |  |                                           | -             |  |                          |  | -          |                       |  |  | 21,969                    |  |  |              | 1,644      |  |              |  | -              |  |  |  | 23,613      | 
|Operating expenses                                     |  |                                           |               |  |                          |  |            |                       |  |  |                           |  |  |              |            |  |              |  |                |  |  |  |             | 
|Selling, general and administrative expense            |  |                                           | -             |  |                          |  | -          |                       |  |  | 17,293                    |  |  |              | 2,344      |  |              |  | -              |  |  |  | 19,637      | 
|Depreciation and amortization                          |  |                                           | 121           |  |                          |  | -          |                       |  |  | 3,660                     |  |  |              | 76         |  |              |  | -              |  |  |  | 3,857       | 
|                                                       |  |                                           |               |  |                          |  |            |                       |  |  |                           |  |  |              |            |  |              |  |                |  |  |  |             | 
|Total operating expenses                               |  |                                           | 121           |  |                          |  | -          |                       |  |  | 20,953                    |  |  |              | 2,420      |  |              |  | -              |  |  |  | 23,494      | 
|Other income (expense)                                 |  |                                           |               |  |                          |  |            |                       |  |  |                           |  |  |              |            |  |              |  |                |  |  |  |             | 
|Interest expense, net                                  |  |                                           | -             |  |                          |  | -          |                       |  |  | (10,018)                  |  |  |              | -          |  |              |  | -              |  |  |  | (10,018)    | 
|Other, net                                             |  |                                           | -             |  |                          |  | -          |                       |  |  | 23                        |  |  |              | 199        |  |              |  | -              |  |  |  | 222         | 
|                                                       |  |                                           |               |  |                          |  |            |                       |  |  |                           |  |  |              |            |  |              |  |                |  |  |  |             | 
|Total other income (expense)                           |  |                                           | -             |  |                          |  | -          |                       |  |  | (9,995)                   |  |  |              | 199        |  |              |  | -              |  |  |  | (9,796)     | 
|Loss before income tax expense (benefit)               |  |                                           | (121)         |  |                          |  | -          |                       |  |  | (8,979)                   |  |  |              | (577)      |  |              |  | -              |  |  |  | (9,677)     | 
|Income tax expense(benefit)                            |  |                                           | (48)          |  |                          |  | -          |                       |  |  | 3,426                     |  |  |              | 323        |  |              |  | (312)          |  |  |  | 3,389       | 
|Equity in net loss of consolidated subsidiaries        |  |                                           | (13,305)      |  |                          |  | -          |                       |  |  | 354                       |  |  |              | -          |  |              |  | 12,951         |  |  |  | -           | 
|                                                       |  |                                           |               |  |                          |  |            |                       |  |  |                           |  |  |              |            |  |              |  |                |  |  |  |             | 
|Net loss                                               |  |                                           | $ (13,066)    |  |                          |  | $        - |                       |  |  | $  (12,051)               |  |  |              | $    (900) |  |              |  | $   13,263     |  |  |  | $  (13,066) | 
|                                                       |  |                                           |               |  |                          |  |            |                       |  |  |                           |  |  |              |            |  |              |  |                |  |  |  |             | 



17



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands







|                                                         |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |        |  |  |   |          | 
|-------------------------------------------------------- |  | ----------------------------------------- | -------- |  | ------------------------ | - | - | --------------------- |  | - | ------------------------- |  |  | ------------ | ----- |  | ------------ | - | ------ |  |  | - | -------- | 
|                                                         |  | For the three months ended March 31, 2010 |         
|                                                         |  | Co-issuerParent                           |          |  | Co-issuerAquilex Finance |   |   | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |  |  | Eliminations |       |  | Consolidated |  
|Revenues                                                 |  | $                                         | -        |  |                          | $ | - |                       |  | $ | 104,670                   |  |  | $            | 3,024 |  |              | $ | -      |  |  | $ | 107,694  | 
|Cost of revenue, exclusive of depreciation shown below   |  |                                           | -        |  |                          |   | - |                       |  |   | 73,715                    |  |  |              | 2,499 |  |              |   | -      |  |  |   | 76,214   | 
|Depreciation                                             |  |                                           | -        |  |                          |   | - |                       |  |   | 4,369                     |  |  |              | -     |  |              |   | -      |  |  |   | 4,369    | 
|                                                         |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |        |  |  |   |          | 
|Gross profit                                             |  |                                           | -        |  |                          |   | - |                       |  |   | 26,586                    |  |  |              | 525   |  |              |   | -      |  |  |   | 27,111   | 
|Operating expenses                                       |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |        |  |  |   |          | 
|Selling, general and administrative expense              |  |                                           | -        |  |                          |   | - |                       |  |   | 16,010                    |  |  |              | 1,046 |  |              |   | -      |  |  |   | 17,056   | 
|Depreciation and amortization                            |  |                                           | 82       |  |                          |   | - |                       |  |   | 4,858                     |  |  |              | 83    |  |              |   | -      |  |  |   | 5,023    | 
|                                                         |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |        |  |  |   |          | 
|Total operating expenses                                 |  |                                           | 82       |  |                          |   | - |                       |  |   | 20,868                    |  |  |              | 1,129 |  |              |   | -      |  |  |   | 22,079   | 
|Other income (expense)                                   |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |        |  |  |   |          | 
|Interest expense, net                                    |  |                                           | (37)     |  |                          |   | - |                       |  |   | (12,937)                  |  |  |              | 48    |  |              |   | -      |  |  |   | (12,926) | 
|Other, net                                               |  |                                           | -        |  |                          |   | - |                       |  |   | (47)                      |  |  |              | (371) |  |              |   | -      |  |  |   | (418)    | 
|                                                         |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |        |  |  |   |          | 
|Total other income (expense)                             |  |                                           | (37)     |  |                          |   | - |                       |  |   | (12,984)                  |  |  |              | (323) |  |              |   | -      |  |  |   | (13,344) | 
|Loss before income tax benefit                           |  |                                           | (119)    |  |                          |   | - |                       |  |   | (7,266)                   |  |  |              | (927) |  |              |   | -      |  |  |   | (8,312)  | 
|Income tax benefit                                       |  |                                           | (18)     |  |                          |   | - |                       |  |   | 4,405                     |  |  |              | (184) |  |              |   | -      |  |  |   | 4,203    | 
|Equity in net income (loss) of consolidated subsidiaries |  |                                           | (12,414) |  |                          |   | - |                       |  |   | (743)                     |  |  |              | -     |  |              |   | 13,157 |  |  |   | -        | 
|                                                         |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |        |  |  |   |          | 
|Net income(loss)                                         |  | $                                         | (12,515) |  |                          | $ | - |                       |  | $ | (12,414)                  |  |  | $            | (743) |  |              | $ | 13,157 |  |  | $ | (12,515) | 
|                                                         |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |        |  |  |   |          | 



|                                                                                    |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |         |  |              |   |   |  |  |   |         | 
|----------------------------------------------------------------------------------- |  | ----------------------------------------- | -------- |  | ------------------------ | - | - | --------------------- |  | - | ------------------------- |  |  | ------------ | ------- |  | ------------ | - | - |  |  | - | ------- | 
|                                                                                    |  | For the three months ended March 31, 2011 |         
|                                                                                    |  | Co-issuerParent                           |          |  | Co-issuerAquilex Finance |   |   | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |  |  | Eliminations |         |  | Consolidated |  
|Cash flows from operating activities                                                |  | $                                         | (13,434) |  |                          | $ | - |                       |  |   | 9,276                     |  |  | $            | (2,725) |  |              | $ | - |  |  | $ | (6,883) | 
|Cash flows from investing activities                                                |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |         |  |              |   |   |  |  |   |         | 
|Capital expenditures                                                                |  |                                           | (38)     |  |                          |   | - |                       |  |   | (5,219)                   |  |  |              | (44)    |  |              |   | - |  |  |   | (5,301) | 
|Initial investment contribution to Aquilex Arabia joint venture                     |  |                                           | (80)     |  |                          |   | - |                       |  |   | -                         |  |  |              | 133     |  |              |   | - |  |  |   | 53      | 
|Payment of expenses on behalf of Aquilex Arabia joint venture                       |  |                                           | (670)    |  |                          |   | - |                       |  |   | (17)                      |  |  |              | 687     |  |              |   | - |  |  |   | -       | 
|Joint venture partner payment of expenses on behalf of Aquilex Arabia joint venture |  |                                           | -        |  |                          |   | - |                       |  |   | -                         |  |  |              | 512     |  |              |   | - |  |  |   | 512     | 
|Proceeds from sales of property and equipment                                       |  |                                           | -        |  |                          |   | - |                       |  |   | 12                        |  |  |              | -       |  |              |   | - |  |  |   | 12      | 
|                                                                                    |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |         |  |              |   |   |  |  |   |         | 
|                                                                                    |  |                                           | (788)    |  |                          |   | - |                       |  |   | (5,224)                   |  |  |              | 1,288   |  |              |   | - |  |  |   | (4,724) | 
|Cash flows from financing activities                                                |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |         |  |              |   |   |  |  |   |         | 
|Payments on long-term debt                                                          |  |                                           | (463)    |  |                          |   | - |                       |  |   | -                         |  |  |              | -       |  |              |   | - |  |  |   | (463)   | 
|Proceeds from revolver debt                                                         |  |                                           | 7,000    |  |                          |   | - |                       |  |   | -                         |  |  |              | -       |  |              |   | - |  |  |   | 7,000   | 
|Payment of deferred financing costs                                                 |  |                                           | (1,063)  |  |                          |   | - |                       |  |   | -                         |  |  |              | -       |  |              |   | - |  |  |   | (1,063) | 
|                                                                                    |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |         |  |              |   |   |  |  |   |         | 
|                                                                                    |  |                                           | 5,474    |  |                          |   | - |                       |  |   | -                         |  |  |              | -       |  |              |   | - |  |  |   | 5,474   | 
|Effect of exchange rates on cash                                                    |  |                                           | -        |  |                          |   | - |                       |  |   | -                         |  |  |              | (165)   |  |              |   | - |  |  |   | (165)   | 
|                                                                                    |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |         |  |              |   |   |  |  |   |         | 
|Net increase (decrease) in cash                                                     |  | $                                         | (8,748)  |  |                          | $ | - |                       |  | $ | 4,052                     |  |  | $            | (1,602) |  |              | $ | - |  |  | $ | (6,298) | 
|                                                                                    |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |         |  |              |   |   |  |  |   |         | 



|                                              |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |   |  |  |   |         | 
|--------------------------------------------- |  | ----------------------------------------- | -------- |  | ------------------------ | - | - | --------------------- |  | - | ------------------------- |  |  | ------------ | ----- |  | ------------ | - | - |  |  | - | ------- | 
|                                              |  | For the three months ended March 31, 2010 |         
|                                              |  | Co-issuerParent                           |          |  | Co-issuerAquilex Finance |   |   | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |  |  | Eliminations |       |  | Consolidated |  
|Cash flows from operating activities          |  | $                                         | (8,819)  |  |                          | $ | - |                       |  |   | 7,999                     |  |  | $            | 629   |  |              | $ | - |  |  | $ | (191)   | 
|Cash flows from investing activities          |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |   |  |  |   |         | 
|Capital expenditures                          |  |                                           | (8)      |  |                          |   | - |                       |  |   | (2,780)                   |  |  |              | (108) |  |              |   | - |  |  |   | (2,896) | 
|Proceeds from sales of property and equipment |  |                                           | -        |  |                          |   | - |                       |  |   | 205                       |  |  |              | -     |  |              |   | - |  |  |   | 205     | 
|Restricted cash                               |  |                                           | -        |  |                          |   | - |                       |  |   | -                         |  |  |              | (454) |  |              |   | - |  |  |   | (454)   | 
|                                              |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |   |  |  |   |         | 
|                                              |  |                                           | (8)      |  |                          |   | - |                       |  |   | (2,575)                   |  |  |              | (562) |  |              |   | - |  |  |   | (3,145) | 
|Cash flows from financing activities          |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |   |  |  |   |         | 
|Payments on long-term debt                    |  |                                           | (1,649)  |  |                          |   | - |                       |  |   | -                         |  |  |              | -     |  |              |   | - |  |  |   | (1,649) | 
|Payment on capital lease obligations          |  |                                           | -        |  |                          |   | - |                       |  |   | (47)                      |  |  |              | -     |  |              |   | - |  |  |   | (47)    | 
|Payment of deferred financing costs           |  |                                           | -        |  |                          |   | - |                       |  |   | (170)                     |  |  |              | -     |  |              |   | - |  |  |   | (170)   | 
|                                              |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |   |  |  |   |         | 
|                                              |  |                                           | (1,649)  |  |                          |   | - |                       |  |   | (217)                     |  |  |              | -     |  |              |   | - |  |  |   | (1,866) | 
|Effect of exchange rates on cash              |  |                                           | -        |  |                          |   | - |                       |  |   | -                         |  |  |              | 360   |  |              |   | - |  |  |   | 360     | 
|                                              |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |   |  |  |   |         | 
|Net increase (decrease) in cash               |  | $                                         | (10,476) |  |                          | $ | - |                       |  | $ | 5,207                     |  |  | $            | 427   |  |              | $ | - |  |  | $ | (4,842) | 
|                                              |  |                                           |          |  |                          |   |   |                       |  |   |                           |  |  |              |       |  |              |   |   |  |  |   |         | 



18



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands







|13. | Reportable Segments
|--- | -------------------

The Company provides
services through two segments: Specialty Repair and Overhaul (SRO) and Industrial Cleaning (IC). The SRO segment provides specialized welding, overlay, repair, and overhaul services for industrial applications of:



| | § |  | Erosion and Corrosion Protection Services which re-establish and preserve the mechanical and structural integrity of high-energy equipment;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

| | § |  | Repair Technologies Services which provide innovative solutions to first-of-a-kind and recurring mechanical, maintenance and configuration
challenges; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| | § |  | Shop Services for replacement part fabrication and repair services.
| | - |  | -------------------------------------------------------------------

The IC segment provides industrial cleaning services to a wide range of processing industries, including petrochemical, oil refining, electric utilities and pulp and paper. The customers are primarily located in
industrial sectors in the United States (U.S.). The largest sources of revenue are:



| | § |  | high-pressure and ultra-high pressure water cleaning (hydroblasting);
| | - |  | ---------------------------------------------------------------------

| | § |  | industrial vacuuming;
| | - |  | ---------------------

| | § |  | chemical cleaning; and
| | - |  | ----------------------

| | § |  | tank cleaning.
| | - |  | --------------

The majority
of these services involve recurring maintenance intended to improve or sustain the operating efficiencies and extend the useful lives of process equipment and facilities.



|                              |  |               |            |  |                  |  |            |  |  | 
|----------------------------- |  | ------------- | ---------- |  | ---------------- |  | ---------- |  |  | 
|                              |  | March 31,2011 |            |  | December 31,2010 |  |            | 
|Total assets:                 |  |               |            |  |                  |  |            |  | 
|Specialty Repair and Overhaul |  |               | $  427,029 |  |                  |  | $  408,640 |  | 
|Industrial Cleaning           |  |               | 282,702    |  |                  |  | 279,374    |  | 
|Corporate                     |  |               | 376,748    |  |                  |  | 385,103    |  | 
|Eliminations                  |  |               | (404,831)  |  |                  |  | (404,081)  |  | 
|                              |  |               |            |  |                  |  |            |  | 
|                              |  |               | $  681,648 |  |                  |  | $  669,036 |  | 
|                              |  |               |            |  |                  |  |            |  | 

The Company evaluates the performance and allocates resources based on Adjusted EBITDA results.
The Company also uses Adjusted EBITDA as a measure of segment profitability.

The Company presents Adjusted EBITDA because they consider
it an important supplemental measure of the Companys performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in their industry and because a determination of
Adjusted EBITDA is necessary to calculate the Companys covenant compliance under the Companys Amended Credit Agreement.

Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain non-cash and other specific items permitted in calculating covenant
compliance in the Companys Amended Credit Agreement.



19



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements(Unaudited)

March 31, 2011



Dollars in thousands







|                                                        |  |                                     |          |  |      |   |          | 
|------------------------------------------------------- |  | ----------------------------------- | -------- |  | ---- | - | -------- | 
|                                                        |  | For the
threemonths ended March 31, |         
|                                                        |  | 2011                                |          |  | 2010 |  
|Total revenue:                                          |  |                                     |          |  |      |   |          | 
|Specialty Repair and Overhaul                           |  | $                                   | 56,549   |  |      | $ | 57,766   | 
|Industrial Cleaning                                     |  |                                     | 52,952   |  |      |   | 49,928   | 
|                                                        |  |                                     |          |  |      |   |          | 
|                                                        |  | $                                   | 109,501  |  |      | $ | 107,694  | 
|                                                        |  |                                     |          |  |      |   |          | 
|Adjusted EBITDA attributable to Aquilex Holdings:       |  |                                     |          |  |      |   |          | 
|Specialty Repair and Overhaul                           |  | $                                   | 6,802    |  |      | $ | 8,107    | 
|Industrial Cleaning                                     |  |                                     | 3,566    |  |      |   | 6,699    | 
|Other(a)                                                |  |                                     | (752)    |  |      |   | -        | 
|                                                        |  |                                     |          |  |      |   |          | 
|Total Adjusted EBITDA attributable to Aquilex Holdings  |  |                                     | 9,616    |  |      |   | 14,806   | 
|Adjusted EBITDA attributable to noncontrolling interest |  |                                     | (502)    |  |      |   | -        | 
|Depreciation and amortization                           |  |                                     | (8,539)  |  |      |   | (9,392)  | 
|Interest expense, net                                   |  |                                     | (10,018) |  |      |   | (12,926) | 
|Incentive unit expense(b)                               |  |                                     | (265)    |  |      |   | (380)    | 
|Sarbanes Oxley costs(c)                                 |  |                                     | (191)    |  |      |   | -        | 
|Other, net(d)                                           |  |                                     | 222      |  |      |   | (420)    | 
|                                                        |  |                                     |          |  |      |   |          | 
|Consolidated loss before income taxes                   |  | $                                   | (9,677)  |  |      | $ | (8,312)  | 
|                                                        |  |                                     |          |  |      |   |          | 
|Depreciation and amortization                           |  |                                     |          |  |      |   |          | 
|Specialty Repair and Overhaul                           |  | $                                   | 4,106    |  |      | $ | 4,798    | 
|Industrial Cleaning                                     |  |                                     | 4,312    |  |      |   | 4,512    | 
|Corporate                                               |  |                                     | 121      |  |      |   | 82       | 
|                                                        |  |                                     |          |  |      |   |          | 
|                                                        |  | $                                   | 8,539    |  |      | $ | 9,392    | 
|                                                        |  |                                     |          |  |      |   |          | 



|(a) | Reflects expenses associated with our controlling interest in the Aquilex Arabia joint venture.
|--- | -----------------------------------------------------------------------------------------------

|(b) | Reflects expenses associated with vesting of time-vested profits interest units granted to members of Aquilex management. The value of these units was determined using the
Black-Scholes-Merton method and the expense recorded as a non-cash compensation charge in SG&A.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Reflects Sarbanes-Oxley Act compliance costs paid to third parties.
|--- | -------------------------------------------------------------------

|(d) | Amounts primarily reflect the impact of unrealized foreign currency transaction gains and losses.
|--- | -------------------------------------------------------------------------------------------------



20



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

March 31, 2011





Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)



The following discussion and analysis of our financial condition and
results of operations should be read together (i) with our Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and (ii) with our December 31, 2010 audited consolidated
financial statements and accompanying notes, and related information and Managements Discussion and Analysis of Financial Condition and Results of Operations included in our 2010 Annual Report on Form 10-K, filed with the SEC on March 31,
2011.

We are a leading global provider of critical maintenance, repair, overhaul and industrial cleaning solutions. Through our divisional and
branch offices in the United States and Europe, we provide our services to a diverse global base of over 600 customers, primarily in the oil and gas refining, chemical and petrochemical production, fossil and nuclear power generation and
waste-to-energy industries. Our customer relationships have extended over many years. We combine our proprietary technology, specialized equipment fleet, skilled workforce and project management expertise to provide a broad range of complementary
industrial services. These services are often mandatory and recurring in nature and are essential for optimizing the operating efficiency, utilization, profitability and safety of our customers facilities.

We operate our business in two segments:

Specialty Repair and
Overhaul (51.6% of first quarter 2011 revenues). Our SRO services include welding repair, erosion and corrosion protection and specialized construction services, including component repair. SRO services focus on repairing and improving the
service life of new or existing equipment using our proprietary technology. We develop and utilize customized, automated equipment for our SRO services which enables us to improve the efficiency of our pipefitters and boilermakers and allows us to
complete repairs in areas characterized by excessive heat, high radiation, complex piping and other structural barriers. We provide services to facilities on a routine, periodic and turnaround basis, as well as emergency work. Turnaround or outage
services are required regularly and are critical to the continued operation of facilities. These services are often necessary to comply with government mandates, particularly in the nuclear industry. In 2010, we completed 724 projects, and in the
first quarter of 2011, we completed 153 projects. Approximately 69.6% of the 2010 revenues of our SRO segment were generated from customers located in North America. For the first quarter of 2011, 74.9% of SRO revenue was generated from customers
located in North America.

Industrial Cleaning (48.4% of first quarter 2011 revenues). Industrial cleaning is critical to maintaining plant
efficiency and safety. These services typically cannot be deferred by customers for long periods of time and constitutes an essential component of our customers regularly scheduled in-plant maintenance programs. Our Industrial Cleaning
services include recurring maintenance activities, such as hydroblasting, industrial vacuuming, chemical cleaning and tank cleaning, and are focused on the chemical and petrochemical production, oil and gas refining and fossil power generation
industries. Industrial Cleaning generates significant recurring revenue from routine, daily maintenance, and since we perform cleaning services at many sites on a daily basis, proximity to our customers is essential. As a result, we maintain a broad
geographic network of 76 service locations, 58 of which are co-located on customers premises. While our cleaning services typically include the removal of waste from the equipment being cleaned, our customers retain ownership of the resulting
waste at all times.



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Aquilex Holdings, LLC and Subsidiaries

March 31, 2011





Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)





Results of Operations

The following summary sets forth our
results of operations on a consolidated basis and for each of our business segments.

Three Months Ended March 31, 2011
Compared with the Three Months Ended March 31, 2010



|                                                   |  |                              |          |  |      |   |          |               |  |  |        |  
|-------------------------------------------------- |  | ---------------------------- | -------- |  | ---- | - | -------- | ------------- |  |  | ------ | -
|                                                   |  | Three months ended March 31, |         
|                                                   |  | 2011                         |          |  | 2010 |   |          | PercentChange | 
|Revenues                                           |  |                              |          |  |      |   |          |               |  |  |        |  
|SRO                                                |  | $                            | 56,549   |  |      | $ | 57,766   |               |  |  | -2.1   | %
|Industrial Cleaning                                |  |                              | 52,952   |  |      |   | 49,928   |               |  |  | 6.1    | %
|                                                   |  |                              |          |  |      |   |          |               |  |  |        |  
|Total revenues                                     |  |                              | 109,501  |  |      |   | 107,694  |               |  |  | 1.7    | %
|                                                   |  |                              |         
|Cost of revenue, exclusive of depreciation         |  |                              |          |  |      |   |          |               |  |  |        |  
|SRO                                                |  |                              | 43,143   |  |      |   | 43,005   |               |  |  | 0.3    | %
|Industrial Cleaning                                |  |                              | 38,063   |  |      |   | 33,209   |               |  |  | 14.6   | %
|                                                   |  |                              |          |  |      |   |          |               |  |  |        |  
|Total cost of revenue                              |  |                              | 81,206   |  |      |   | 76,214   |               |  |  | 6.5    | %
|                                                   |  |                              |         
|Depreciation                                       |  |                              |          |  |      |   |          |               |  |  |        |  
|SRO                                                |  |                              | 1,584    |  |      |   | 1,169    |               |  |  | 35.5   | %
|Industrial Cleaning                                |  |                              | 3,098    |  |      |   | 3,200    |               |  |  | -3.2   | %
|                                                   |  |                              |          |  |      |   |          |               |  |  |        |  
|Total depreciation                                 |  |                              | 4,682    |  |      |   | 4,369    |               |  |  | 7.2    | %
|Gross profit                                       |  |                              |          |  |      |   |          |               |  |  |        |  
|SRO                                                |  |                              | 11,822   |  |      |   | 13,592   |               |  |  | -13.0  | %
|Industrial Cleaning                                |  |                              | 11,791   |  |      |   | 13,519   |               |  |  | -12.8  | %
|                                                   |  |                              |          |  |      |   |          |               |  |  |        |  
|Total gross profit                                 |  |                              | 23,613   |  |      |   | 27,111   |               |  |  | -12.9  | %
|                                                   |  |                              |          |  |      |   |          |               |  |  |        |  
|                                                   |  |                              |         
|Selling, general and administrative (SG&A) expense |  |                              |          |  |      |   |          |               |  |  |        |  
|SRO                                                |  |                              | 6,839    |  |      |   | 6,858    |               |  |  | -0.3   | %
|Industrial Cleaning                                |  |                              | 11,544   |  |      |   | 10,198   |               |  |  | 13.2   | %
|Other                                              |  |                              | 1,254    |  |      |   | -        |               |  |  | 100.0  | %
|                                                   |  |                              |          |  |      |   |          |               |  |  |        |  
|Total SG&A                                         |  |                              | 19,637   |  |      |   | 17,056   |               |  |  | 15.1   | %
|                                                   |  |                              |         
|Depreciation and amortization (D&A)                |  |                              |          |  |      |   |          |               |  |  |        |  
|SRO                                                |  |                              | 2,522    |  |      |   | 3,629    |               |  |  | -30.5  | %
|Industrial Cleaning                                |  |                              | 1,214    |  |      |   | 1,312    |               |  |  | -7.5   | %
|Corporate                                          |  |                              | 121      |  |      |   | 82       |               |  |  | 47.6   | %
|                                                   |  |                              |          |  |      |   |          |               |  |  |        |  
|Total D&A                                          |  |                              | 3,857    |  |      |   | 5,023    |               |  |  | -23.2  | %
|                                                   |  |                              |         
|Other income (expense)                             |  |                              |          |  |      |   |          |               |  |  |        |  
|Interest expense, net                              |  |                              | (10,018) |  |      |   | (12,926) |               |  |  | -22.5  | %
|Other, net                                         |  |                              | 222      |  |      |   | (418)    |               |  |  | -153.1 | %
|                                                   |  |                              |          |  |      |   |          |               |  |  |        |  
|Total other income (expense)                       |  |                              | (9,796)  |  |      |   | (13,344) |               |  |  | -26.6  | %
|                                                   |  |                              |          |  |      |   |          |               |  |  |        |  
|                                                   |  |                              |         
|Loss before income tax benefit                     |  |                              | (9,677)  |  |      |   | (8,312)  |               |  |  | 16.4   | %
|Income tax expense                                 |  |                              | 3,389    |  |      |   | 4,203    |               |  |  | -19.4  | %
|                                                   |  |                              |          |  |      |   |          |               |  |  |        |  
|Net loss                                           |  | $                            | (13,066) |  |      | $ | (12,515) |               |  |  | 4.4    | %
|                                                   |  |                              |          |  |      |   |          |               |  |  |        |  



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##### Table of Contents

Aquilex Holdings, LLC and Subsidiaries

March 31, 2011





Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)



Revenues

Revenues increased $1.8 million, or 1.7%, for the three months ended March 31, 2011 when compared to the corresponding prior year period. The increase was
attributable to higher revenues in our Industrial Cleaning segment.

SRO. Revenues in our SRO segment decreased $1.2 million, or 2.1%, for the
three months ended March 31, 2011 when compared to the corresponding prior year period. The decrease was primarily the result of a $13.0 million decline in our engineered solution and other nuclear repair service lines as the number and size of
these highly engineered projects decreased. In addition, revenues decreased for customers in Fossil Power and other industries by $1.5 million and $0.8 million, respectively. These decreases were partially offset by increases of $4.7 million and
$8.9 million from our Petrochemical and Refinery customers, respectively, for the three months ended March 31, 2011 when compared to the corresponding prior year period.

Industrial Cleaning. Revenues in our IC segment increased $3.0 million, or 6.1%, for the three months ended March 31, 2011 when compared to the corresponding prior year period, largely due to increased
demand for cleaning services related to customers turnaround projects. The increase was primarily the result of the $4.3 million increase from cleaning services to our Petrochemical customers for the three months ended March 31, 2011 when
compared to the corresponding prior year period. The increases were offset by decreases of $0.8 million and $0.7 million from Fossil-fuel power and Pulp and Paper customers, respectively, for the three months ended March 31, 2011 when compared
to the corresponding prior year period.

Cost of revenue, exclusive of depreciation

Cost of revenue, exclusive of depreciation, increased $5.0 million, or 6.5%, for the three months ended March 31, 2011 when compared to the corresponding
prior year period. Cost of revenue as a percentage of revenue increased 3.4 percentage points to 74.2% for the three months ended March 31, 2011, from 70.8% for the three months ended March 31, 2010.

SRO. Cost of revenue, exclusive of depreciation, increased $0.1 million, or 0.3%, for the three months ended March 31, 2011 when compared to the
corresponding prior year period. Approximately $1.2 million of the increase for the three months ended March 31, 2011 was driven by (a) project mix which was driven by a greater proportion of lower margin services provided to customers,
(b) higher job costs for international projects, and (c) lower pricing on several jobs due to competitive pricing pressures. This increase in cost of revenue was offset by (1) a volume decrease of approximately $0.8 million resulting
from the 2.1% decline in SRO revenue, and (2) cost reductions of $0.3 million related to controlling indirect costs.

Industrial Cleaning.
Cost of revenue, exclusive of depreciation, increased $4.9 million, or 14.6%, for the three months ended March 31, 2011 when compared to the corresponding prior year period. The increase was primarily driven by a volume increase of
approximately $2.0 million resulting from the 6.1% revenue increase for the three months ended March 31, 2011 when compared to the corresponding prior year period. Cost of revenue was further increased by increases in labor, fuel, and supplies
costs of approximately $1.7 million, $0.8 million, and $0.4 million, respectively, in the three months ended March 31, 2011 when compared to the corresponding prior year period.

Cost of revenue - Depreciation

Depreciation costs increased $0.3 million, or 7.2%, for the three months ended March 31, 2011 when compared to the corresponding prior year period. The
increase was primarily due to increased depreciation on 2010 capital expenditures.

SRO. Depreciation costs in our SRO segment increased $0.4
million, or 35.5%, for the three months ended March 31, 2011 when compared to the corresponding prior year period. The increase was primarily due to increased depreciation resulting from the $3.9 million of 2010 capital expenditures.

Industrial Cleaning. Depreciation costs in our Industrial Cleaning segment decreased $0.1 million, or 3.2%, for the three months ended
March 31, 2011 when compared to the corresponding prior year period. The decrease was primarily due to asset dispositions and assets becoming fully depreciated, partially offset by the depreciation of new capital assets acquired.



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Aquilex Holdings, LLC and Subsidiaries

March 31, 2011





Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)



Gross profit

Gross profit decreased $3.5 million, or 12.9%, for the three months ended March 31, 2011 when compared to the corresponding prior year period. Our gross
profit margin decreased to 21.6% for the three months ended March 31, 2011 compared to 25.2% for the corresponding prior year period.

SRO.Gross profit in our SRO segment decreased $1.8 million, or 13.0%, for the three months ended March 31, 2011 when compared to the corresponding prior year period. This decrease was primarily the result of a 2.1% decrease in revenues, job
project mix, higher job costs for international work, competitive pricing, and a 35.5% increase in depreciation for the three months ended March 31, 2011 when compared to the corresponding prior year period.

Industrial Cleaning.Gross profit in our Industrial Cleaning segment decreased $1.7 million, or 12.8%, for the three months ended March 31, 2011 when
compared to the corresponding prior year period. The decrease was primarily the result of the 14.6 percentage point increase in cost of revenue, exclusive of depreciation, as a result of higher labor, fuel, supply and rental equipment costs, offset
to a lesser extent by a 6.1% increase in revenue for the three months ended March 31, 2011 when compared to the corresponding prior year period.

Selling, general and administrative expense

SG&A expense increased $2.6 million, or 15.1%, for the three
months ended March 31, 2011 when compared to the corresponding prior year period. As a percentage of revenues, SG&A expense increased to 17.9% for the three months ended March 31, 2011 from 15.8% of revenues for the corresponding prior
year period.

SRO. SG&A expense in our SRO segment decreased 0.3% for the three months ended March 31, 2011 and essentially remained
consistent with the prior year corresponding period. SG&A expense in our SRO segment for the three months ended March 31, 2011 represented 12.1% of SRO revenues during this period, compared to 11.9% in the corresponding prior year period.
This 0.2 percentage point increase primarily resulted from the SG&A remaining relatively flat while revenues declined 2.1% from the prior year corresponding period.

Industrial Cleaning. SG&A expense in our Industrial Cleaning segment increased $1.3 million, or 13.2%, for the three months ended March 31, 2011 when compared to the corresponding prior year period.
SG&A expense in our IC segment for the three months ended March 31, 2011 represented 21.8% of IC revenues during this period, compared to 20.4% in the corresponding prior year period. This increase is primarily the result of an increase in
labor costs of approximately $0.3 million and health insurance costs of approximately $0.2 million for the three months ended March 31, 2011 when compared to the corresponding prior year period. In addition, SG&A in the comparable period in
2010 was lower as a result of $0.7 million in proceeds from business interruption insurance for Hurricane Ike that was received in the three months ended March 31, 2010.

Corporate and other. The Company policy is to allocate out all Corporate SG&A to the SRO and Industrial Cleaning segments. For the three months ended March 31, 2011, we began consolidating the
Aquilex Arabia joint venture as a result of receiving the approval and certification by the Saudi government in February 2011. This consolidation contributed $1.3 million to the overall increase as compared to corresponding prior year period.

Depreciation and amortization

Depreciation and amortization costs decreased $1.2 million, or 23.2%, for the three months ended March 31, 2011 when compared to the corresponding prior year
periods.

SRO. Depreciation and amortization costs in our SRO segment decreased $1.1 million, or 30.5% for the three months ended March 31,
2011 when compared to the corresponding prior year period. Approximately $1.0 million of the decrease primarily resulted from the reduced amortization in the three months ending March 31, 2011 resulting from the $53.2 million impairment of SRO
amortizable assets in the fourth quarter of 2010. The impairment reduced the amortizable base over the remaining life and as a result the quarterly amortization decreased. The remaining $0.1 of the decrease was primarily due to asset dispositions



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Aquilex Holdings, LLC and Subsidiaries

March 31, 2011





Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)



and assets becoming fully depreciated, partially offset by depreciation of new assets acquired in 2010 and the first quarter of 2011.

Industrial Cleaning. Depreciation and amortization costs in our Industrial Cleaning segment decreased $0.1 million, or 7.5%, for the three months ended March 31, 2011 when compared to the corresponding
prior year period. The decrease was primarily due to asset dispositions and assets becoming fully depreciated, partially offset by depreciation of new assets acquired in 2010 and the first quarter of 2011.

Interest expense, net

Net interest expense
decreased $2.9 million, or 22.5%, for the three months ended March 31, 2011 when compared to the corresponding prior year period. The decrease was primarily attributable to a lower effective interest rate on the current capital structure of
term debt and senior notes during the three months ended March 31, 2011 that primarily resulted from refinancing activities that we undertook in April 2010. Our average debt, net of original issue discount, during the three months ended
March 31, 2011 was $379.4 million, compared with $374.1 for the corresponding prior year period.

Other, net

Other, net fluctuated based primarily on gains and losses from foreign currency transactions for the three months ended March 31, 2011, when compared to the
corresponding prior year period.

Income taxes

Income tax provisions for the interim period are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items which are required to be discretely
recognized within the current interim period. The income tax expense decreased $0.8 million for the three months ended March 31, 2011 when compared to the corresponding prior year period. Our effective tax rate was (35.0%) and
(50.6%) for the three months ended March 31, 2011 and 2010, respectively. The change in our effective tax rate is primarily attributable to changes in projected pre-tax book loss, deduction limitations for per diems for field employees,
non-deductible stock based compensation, and other nondeductible expenses. As a result of these significant nondeductible expenses, the forecasted annual effective income tax rates for the three months ended March 31, 2011 and 2010 are
negative, thereby resulting in income tax expense on pre-tax book losses for such periods.

For the three months ended March 31, 2011 and 2010,
respectively, we did not recognize any previously unrecognized tax benefits nor did we increase the reserve for uncertain tax positions.

Non-GAAP Measures

EBITDA, a measure
used by management to measure operating performance, is defined as net income(loss) plus interest expense (income), net, income taxes, depreciation and amortization. EBITDA is not a recognized term under GAAP and does not purport to be an
alternative to net income(loss) as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow available for managements
discretionary use, as it does not consider certain cash requirements such as tax payments and debt service requirements. Management believes EBITDA is helpful in highlighting trends because EBITDA excludes the results of decisions that are outside
the control of operating management and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. Management
compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all
companies use identical calculations, these presentations of EBITDA may not be comparable to similarly titled measures of other companies.

Adjusted
EBITDA is defined as EBITDA further adjusted to exclude certain non-cash and other specific items permitted in calculating covenant compliance in our Amended Credit Agreement.



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Aquilex Holdings, LLC and Subsidiaries

March 31, 2011



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)

We present Adjusted EBITDA because we consider it an important supplemental measure of our performance and believe it is frequently used by securities analysts,
investors and other interested parties in the evaluation of companies in our industry and because a determination of Adjusted EBITDA is necessary to calculate our covenant compliance under our Amended Credit Agreement. You are encouraged to evaluate
each adjustment and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as
reported under GAAP. Some of these limitations are:



| | § |  | they do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
| | - |  | -----------------------------------------------------------------------------------------------------------------------

| | § |  | they do not reflect changes in, or cash requirements for, our working capital needs;
| | - |  | ------------------------------------------------------------------------------------

| | § |  | they do not reflect the significant interest expense, or the cash requirements necessary to service interest on our debts;
| | - |  | --------------------------------------------------------------------------------------------------------------------------

| | § |  | they do not reflect our income tax expense or the cash requirements to pay our taxes;
| | - |  | -------------------------------------------------------------------------------------

| | § |  | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA
and Adjusted EBITDA do not reflect any cash requirements for such replacements;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | § |  | other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

| | § |  | Adjusted EBITDA does not reflect cash expenditures that may recur in future periods.
| | - |  | ------------------------------------------------------------------------------------

The following table provides a reconciliation of EBITDA and Adjusted EBITDA attributable to equity holders of the Company to net loss attributable to equity holders of the Company.



|                                                 |  |                                     |          |  |      |   |          | 
|------------------------------------------------ |  | ----------------------------------- | -------- |  | ---- | - | -------- | 
|                                                 |  | For the three monthsended March 31, |         
|($ in thousands)                                 |  | 2011                                |          |  | 2010 |  
|                                                 |  |                                    
|Net loss attributable to Aquilex Holdings        |  | $                                   | (12,564) |  |      | $ | (12,515) | 
|Interest expense, net                            |  |                                     | 10,018   |  |      |   | 12,926   | 
|Income tax expense (benefit)                     |  |                                     | 3,389    |  |      |   | 4,203    | 
|Depreciation and amortization                    |  |                                     | 8,539    |  |      |   | 9,392    | 
|                                                 |  |                                     |          |  |      |   |          | 
|EBITDA attributable to Aquilex Holdings          |  |                                     | 9,382    |  |      |   | 14,006   | 
|                                                 |  |                                    
|Adjustments to EBITDA                            |  |                                     |          |  |      |   |          | 
|Incentive units expense(a)                       |  |                                     | 265      |  |      |   | 380      | 
|Sarbanes Oxley costs(b)                          |  |                                     | 191      |  |      |   | -        | 
|Other(c)                                         |  |                                     | (222)    |  |      |   | 420      | 
|                                                 |  |                                     |          |  |      |   |          | 
|Adjusted EBITDA attributable to Aquilex Holdings |  | $                                   | 9,616    |  |      | $ | 14,806   | 
|                                                 |  |                                     |          |  |      |   |          | 





|(a) | Reflects expenses associated with vesting of time-vested profits interest units granted to members of Aquilex management. The value of these units was determined using the
Black-Scholes-Merton method and the expense recorded as a non-cash compensation charge in SG&A.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Reflects Sarbanes-Oxley Act compliance costs paid to third parties.
|--- | -------------------------------------------------------------------

|(c) | Amounts primarily reflect the impact of unrealized foreign currency transaction gains and losses.
|--- | -------------------------------------------------------------------------------------------------



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Aquilex Holdings, LLC and Subsidiaries

March 31, 2011





Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)



Liquidity and Capital Resources

At March 31, 2011, we had cash of $2.4 million, working capital of $54.6 million and outstanding debt obligations, net of OID, of $386.2 million. At
March 31, 2011, we had $14.0 million outstanding letter of credit obligations. Our ability to satisfy our expenses and debt obligations will depend on our future performance, which will be affected by financial, business, economic, regulatory
and other factors. We will not be able to control many of these factors, such as economic conditions and government regulation.

On October 13,
2010, Moodys Investors Service downgraded our Corporate Family Rating (CFR) from B2 to B3. Further, on September 22, 2010, Standards & Poors (S&P) placed our corporate credit rating of B on CreditWatch with
negative implications. These actions may negatively impact our ability to conduct future financings. On February 17, 2011, S&P removed our rating from CreditWatch and concurrently affirmed our B rating.

At March 31, 2011, the available revolving capacity under our revolving credit facility was $29.0 million. Our ability to access our revolving credit facility
is contingent upon our continued compliance with certain covenants on the various facilities, described more fully below and in Note 7 in our accompanying condensed consolidated financial statements.

Our Credit Agreement contains certain restrictive covenants that include a minimum interest coverage ratio; maximum leverage ratio and maximum secured leverage
ratio. Our Credit Agreement also contains cross default covenants tied to all other indebtedness of the Company. The minimum cash interest coverage ratio, the maximum leverage ratio and the maximum secured leverage ratio (each as described below)
are computed based on the Companys financial results for the last twelve months ended.

As of March 31, 2011, the Company was in compliance
with all of its financial covenants in its Credit Agreement.

On February 28, 2011, we entered into Amendment No. 1 (the
Amendment) to our Amended and Restated Credit Agreement, dated as of April 1, 2010 and modified on June 17, 2010 (as amended, the Credit Agreement), with the Royal Bank of Canada, as administrative agent and L/C
(Letter of Credit) Issuer, and the required lenders thereunder.

The Amendment, among other things, provided the following:

| | § |  | increased the Applicable Rate by 50 basis points;
| | - |  | -------------------------------------------------

| | § |  | increased the size of the basket for investments in Non-Loan Party Subsidiaries and Unrestricted Subsidiaries to the greater of $20,000,000 and 10% of Total
Tangible Assets;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | § |  | increased the size of the baskets for Non-Loan Party Subsidiaries to guarantee and incur indebtedness in the aggregate to 10% of Total Tangible Assets; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | § |  | granted additional head room for our financial maintenance covenants (Total Leverage Ratio, Interest Coverage Ratio and Senior Secured Leverage Ratio).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

The amended financial covenants changed favorably for the Company and are as follows:



| | § |  | A minimum interest coverage ratio, ranging from 1.55:1 to 1.95:1 over the term of the Credit Agreement. The minimum interest coverage ratio is computed as the
Adjusted EBITDA to consolidated interest expense.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | § |  | A maximum leverage ratio, ranging from 6.75:1 to 4.85:1 over the term of the Credit Agreement. The maximum leverage ratio is computed as consolidated total debt
to Adjusted EBITDA after giving effect to any pro forma adjustments which are those relating to the EBITDA of a permitted acquisition or disposition.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | § |  | A maximum secured leverage ratio ranging from 3.00:1 to 2.50:1 over the term of the Credit Agreement. The maximum secured leverage ratio is computed as the
consolidated secured indebtedness to Adjusted EBITDA giving effect to pro forma adjustments, as defined above, deeming to have occurred on the first day of the applicable measurement period.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The foregoing description of the Credit Agreement is qualified in its entirety by reference to the Credit Agreement and the Amendment, which were incorporated by
reference as exhibits to our 2010 Annual Report on Form 10-K, filed with the SEC on March 31, 2011.



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Aquilex Holdings, LLC and Subsidiaries

March 31, 2011





Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)





Based on our current business plan, we believe our existing cash balances, cash generated from operations and borrowing availability under our revolving credit
facility will be sufficient to meet our anticipated cash needs, including debt payment requirements, for the next twelve months. We also believe that we will be in compliance with the debt covenants for the next twelve months. Continued compliance
with our debt covenants is dependent upon us obtaining a minimum Adjusted EBITDA. Our expectations regarding Adjusted EBITDA depend on certain estimates and assumptions regarding the demand and rates for our services and operating and general and
administrative expenses which could prove to be inaccurate. It also depends on an estimate of the extent and timing of the release of deferred maintenance and repair projects by our customers. A deviation from one or more of these estimates or
assumptions could result in a violation of one or more of our covenants which could result in all or a portion of our outstanding debt becoming immediately due and payable. We may be required to seek amendments or waivers in the future, and there
can be no certainty that such amendment or waivers would be forthcoming. If we were required to seek an amendment or waiver of our financial ratio covenants and were unable to obtain one, we would default under our Credit Agreement which could have
a material adverse impact on the Company.

Cash Flows

Three Months Ended March 31, 2011 Compared to the Three Months Ended March 31, 2010

Net Cash Used in Operating Activities

Our
net cash used in operating activities for the three months ended March 31, 2011 and 2010 was $6.9 million and $0.2 million, respectively, resulting in an increase of $6.7 million in net cash used in operating activities for the three months
ended March 31, 2011 compared to the corresponding prior year period. The increase in net cash used in operating activities is primarily the result of a $2.7 million decrease in accounts payable and accrued liabilities. This change resulted
primarily from the timing of cash receipts and payments. The overall increase in net cash used in operating activities was further impacted by the adjustment for non-cash items of approximately $3.5 million which resulted primarily from decreases to
amortization of intangibles, deferred financing costs and original issue discount. The remainder of the increase of approximately $0.5 million in net cash used in operating activities was the result of various other working capital changes.

Net Cash Used in Investing Activities

Our net cash used in investing activities increased by approximately $1.6 million for the three months ended March 31, 2011 compared to the corresponding prior year period, primarily due to an increase in
capital expenditures of $2.4 million offset by $0.5 million of Aquilex Arabia expenses paid for by our joint venture partner, and a $0.5 decrease in the restricted cash usage.

Net Cash Provided By (Used in) Financing Activities

Our net cash provided by financing activities increased
by $7.3 million for the three months ended March 31, 2011 compared to the corresponding prior year period due primarily to the $7.0 million draw from our revolving credit facility in the three months ended March 31, 2011 as compared to
none in the corresponding prior year period. Further, principal payments decreased $1.2 million as a result of the debt refinancing. These increases in first quarter 2011 financing activities were primarily offset by $1.1 million of deferred
financing costs payments associated with the amendment of the Credit Agreement.

Capital Expenditures

Capital expenditures were $5.3 million and $2.9 million for the three months ended March 31, 2011 and 2010, respectively.

Contractual Obligations and Other Commitments

Except as noted below, we did not have any material changes to our contractual obligations and other commitments as provided in our 2010 Annual Report on Form 10-K, filed with the SEC on March 31, 2011.



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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)





Off-Balance Sheet Arrangements

At March 31, 2011, we had bonding obligations of $7.8 million. We
had no material changes in our operating lease arrangements during the three months ended March 31, 2011.

New Accounting Pronouncements

Accounting Standards Update (ASU) 2009-13, Revenue Recognition (Topic 605)

In October 2009, the Financial Accounting Standards Board (FASB) issued amendments to existing standards for revenue arrangements with multiple components. The amendments generally require the allocation of
consideration to separate components based on the relative selling price of each component in a revenue arrangement. The amendments are effective prospectively for revenue arrangements entered into or materially modified after January 1, 2011.
The adoption of this guidance did not have any effect on the Companys financial position and results of operations.

The FASB issues ASUs to amend
the authoritative literature in ASC. There have been a number of ASUs to date that amend the original text of ASC. Except for the ASU listed above, those issued to date either (i) provide supplemental guidance, (ii) are technical
corrections, (iii) are not applicable to our company or (iv) are not expected to have a significant impact on our company.



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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks, which include changes in U.S. interest rates and to a lesser extent, foreign exchange rates and commodity prices. We do not engage in financial transactions for trading or
speculative purposes. There have been no material changes in this Item from the discussion contained in our 2010 Annual Report on Form 10-K, filed with the SEC on March 31, 2011.

Item 4. Controls and Procedures

Under the supervision and with the
participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures as such term is defined under Rule 13a-15e promulgated under the
Exchange Act. Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.



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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q
contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of forward-looking terminology such as believe,
expect, may, will, should, seek, on-track, plan, project, forecast, intend or anticipate, or the negative thereof or
comparable terminology, or by discussions of vision, strategy or outlook. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking
statements. In addition, we, through our senior management, from time to time, may make forward-looking public statements concerning our expected future operations and performance and other developments. These statements are not historical facts and
represent only our beliefs regarding future events, and you are cautioned that our business and operations are subject to a variety of risks and uncertainties, many of which are beyond our control. Consequently, our actual results may differ
materially from those projected by any forward-looking statements. Factors that could cause our actual results to differ materially from those projected include, but are not limited to, the following: (1) general economic conditions and
instability and volatility in the financial markets; (2) a deterioration in our safety record; (3) claims relating to professional liability, personal injury or property damage; (4) failure to create or maintain a technological
advantage over our competitors; (5) failure to complete projects in a timely fashion; (6) failure to obtain the award of new projects or renewal of existing projects; (7) difficulties in hiring skilled craft workers;
(8) increases in the cost of labor or the incidence of labor disputes; (9) increased worker turnover rate; (10) decrease in the demand for the products of original equipment manufacturers; (11) increases in cost and availability
of weld wire, chemicals and certain other materials; (12) decline in market opportunities for our products and our ability to take advantage of those opportunities; (13) risks associated with our new branding strategy and the related
costs; (14) adverse changes in foreign exchange rates; (15) severe weather conditions and other catastrophes; (16) incidence of labor disputes; (17) liabilities in the event of a spill, discharge or release of chemicals or
hazardous materials; (18) economic, political and other risks associated with international operations; (19) adverse changes in law or regulations; (20) loss of certain required certifications, licenses and permits;
(21) impairments to intangible assets or long-lived assets; (22) failure to correctly estimate costs for our projects; (23) performance failures of our third-party suppliers; (24) the loss of a key subcontractor;
(25) failure to protect our intellectual property rights; (26) negative public perception of nuclear power and radioactive materials; (27) the impact of our substantial indebtedness; and (28) the significant limitations contained
in our Credit Agreement and the Indenture governing our outstanding senior notes, including limitations on making acquisitions, obtaining performance bonding, expanding internationally, incurring additional debt, making investments, selling assets
and taking other actions. For a fuller description of these and other possible uncertainties, please refer to our 2010 Annual Report on Form 10-K, filed with the SEC on March 31, 2011. Our forward-looking statements contained herein speak only
as of the date hereof, and we make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made. If we do revise or update one or more forward-looking
statements, you should not conclude that we will make additional revisions or updates with respect thereto or with respect to the other forward-looking statements, except as required by law.



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Part II  OTHER INFORMATION







|Item 1. | Legal Proceedings
|------- | -----------------

See Commitments and Contingencies in Note
9 to our condensed consolidated financial statements included in Item 1, Financial Statements of this Report for information on legal proceedings, which is hereby incorporated by reference into this Item 1 of Part II.



|Item 1A. | Risk Factors
|-------- | ------------

There have been no material changes in the
status of our risk factors from those described in our 2010 Annual Report on Form 10-K, filed with the SEC on March 31, 2011.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None.



|Item 3. | Defaults upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | Removed and Reserved
|------- | --------------------



|Item 5. | Other Information
|------- | -----------------

None.



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|Item 6. | Exhibits
|------- | --------



|           |  |                                                                                                             
|---------- |  | ------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description of Document                                                                                     
|           | 
|31.1*      |  | Rule 13a-14(a) Certification by Principal Executive Officer                                                 
|           | 
|31.2*      |  | Rule 13a-14(a) Certification by Principal Financial Officer                                                 
|           | 
|32**       |  | Section 1350 Certifications by Principal Executive Officer and Principal Financial Officer                  
|           |  |                                                                                                             
|*          |  | Filed herewith.                                                                                             
|**         |  | Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K under the Exchange Act.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



Aquilex Holdings LLCBy:

/s/ L.W. Varner, Jr.Name:

L.W. Varner, Jr.Title:

Chief Executive Officer and President




By:

/s/ Jay W. FergusonName:

Jay W. FergusonTitle:

Senior Vice President and Chief Financial Officer


Date: May 16, 2011



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